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

by Kevin Rudd

Over the last 180 years, all the biggest threats to China’s security have come from the sea. It was from the sea that Britain and France successfully attacked China’s maritime defenses during the First and Second Opium Wars. It was from the sea that Japan launched a series of successful military campaigns against China between 1895 and 1945. And it is the sea—and the American naval forces that have dominated it for decades—that has so far prevented Communist China from reclaiming Taiwan. It is, therefore, unsurprising that China has long seen its maritime periphery to the east as particularly hostile.

China’s national security strategy is, in part, aimed at minimizing China’s vulnerability to the interdiction of its oil supplies in the event of a global or regional crisis—including the possibility of armed conflict with the United States. About 80 percent of all Chinese oil imports pass through the strategic choke points of the Strait of Hormuz between the Persian Gulf and the Gulf of Oman, and the Strait of Malacca between the Indian Ocean and the South China Sea. China’s continuing interest in securing land-based oil and gas pipelines from central Asia, Russia, and possibly Iran is driven by the desire to reduce these vulnerabilities in energy supply. But its continued reliance on maritime energy imports—and the fact that 80 percent of total global sea trade crosses the Indian Ocean—explains China’s deep interest in developing its military capacity to protect its sea line of communication linking the Gulf to China’s eastern seaboard through the Indian Ocean.

China and Indian ocean

The foremost dynamic driving China’s evolving perception of the region’s importance is long-term energy security. The Middle East represents 47 percent of China’s imported oil and about 12 percent of its natural gas needs, a dependence that is only expected to continue to grow. At the same time, the United States, in large part because of its hydraulic-fracturing revolution over the last decade, has grown much less dependent on the Middle East for its energy needs. The Gulf states are acutely aware of this shift, as the share of their sales going to China continues to grow. By 2020, China represented around 23 percent of total Saudi oil sales, 22 percent of Iraqi sales, 28 percent of Iranian sales, 9.4 percent of United Arab Emirates sales, and 14 percent of total Qatari LNG sales.

China's Oil need in middle east

All this came to a head in March 2021, when the EU (in coordination with the US, UK, and Canada) unveiled human rights sanctions against China—for the first time since 1989—in response to growing evidence of large-scale human rights abuses in Xinjiang. After the sanctions were imposed, Beijing hit back immediately with seemingly little understanding of the likely consequences. It imposed sanctions on a wide array of European policy think tanks, individual academics researching Xinjiang, and—most significantly—multiple EU committees and members of the European Parliament.

China xinzhang sanctions

As has been the case elsewhere in the developing world, the pattern of China’s trade, FDI, and official credit flows to Latin America reflects Beijing’s global emphasis on energy security, raw materials, and infrastructure investment. The vast bulk of China’s imports focuses on just four commodities: oil, iron ore, copper, and soya beans. About 90 percent of Chinese FDI is directed to energy, mining, and particularly infrastructure; as of 2020, some eighty-three major engineering projects—roads, rail, ports, airports, bridges, canals, dredging, and urban transport—were underway across most countries in the region.

The People’s Republic of China is challenging the political legitimacy and policy effectiveness of the Western liberal-democratic model that was inherent to the norms and rules of the order that had been created. The values espoused by these democracies and the international institutions and rules that have been built on them continue to represent a political and normative obstacle for Beijing. To combat this, China is creating its new multilateral institutions outside the framework of the postwar settlement, which China has consistently seen as an order created and imposed by the victorious Western colonial powers. This is despite the fact that China under the then nationalist government participated in the construction of this very order.

China's Global challenge

The first of these arenas is fifth-generation (or 5G) telecom. The 5G data networks can transmit data at twenty times the speed of current 4G networks, drawing on the combination of mid-band and high-band radio frequencies used by those networks. The macrosignificance of 5G is that it is set to become a major new enabling platform for the deployment of AI systems globally, such as self-driving vehicles. China has become the undisputed leader in 5G technologies, infrastructure, and systems. The Chinese state is estimated to have invested some $180 billion since 2014 in the development of 5G technologies. This was based on a specific 2013 state plan aimed at making China a global 5G leader—including the generous allocation of high-band spectrum, the building of 350,000 mobile towers across the country, and direct state support of national champions such as Chinese telecom giant Huawei.

New technologies 5G..

Is there a detailed blueprint of what a China-led international system would finally look like in the inner recesses of the Chinese leadership? At this stage, I doubt it. As discussed in earlier chapters, that is not the way China has approached large-scale policy projects in the past—either at home or abroad. China’s preferred approach is more iterative. Beijing tends to announce an all-embracing concept and then throw it to its think tanks for further analysis before beginning a series of trials in the real world. In the domestic context, the CCP typically trials its policies in various localities, monitoring reactions and learning from mistakes—sometimes for years—before introducing them nationally.

One concrete idea that gives form and shape to the type of new international order that Beijing has in mind is China’s advocacy of its development model for the world at large. This has been gathering in momentum since Xi first floated the idea at the Nineteenth Party Congress in 2017, when he said that China would not only “take an active part in reforming and developing the global governance system” but also offer “Chinese wisdom and a Chinese approach to solving the problems facing mankind,” including by “blazing a new trail for other developing countries to achieve modernization.” As noted previously, this was the first occasion on which Xi advocated China’s authoritarian capitalist system as an alternative development theory to that offered by the liberal-democratic world.

At this point, we can safely say that China is likely to support a future order that is more accommodating of authoritarian political systems, with negligible intrusion from human rights bodies in the internal affairs of member states. Instead, it will increasingly champion its version of human rights, including prioritizing the right to development, by drawing on its success in poverty alleviation and on the G-77’s dissatisfaction with progress in the implementation of the sustainable development goals. Beijing would also be unlikely to authorize any future intrusion in the internal affairs of member states on the grounds of “international humanitarian intervention.” The future purview of institutions such as the International Criminal Court would become even more circumscribed.

Xi Jinping’s political modus operandi, when confronted with a challenge—either foreign or domestic—is to double down: to either crash through or crash. Unlike most of his recent predecessors, Xi is a calculated, albeit not a reckless, risk taker. His critical skill is to identify a political or policy vacuum and to fill it before others do. He is a master tactician in building political momentum across the cumbersome internal machinery of the CCP by deploying key personnel to critical positions; mobilizing the party’s propaganda apparatus; and anchoring his worldview in a single, all-encompassing ideological framework in order to convince the party and the country that they are critical parts of a historical, righteous, and “correct” cause. Xi

XJP framework

Xi’s real political vulnerability lies with the economy. As noted in previous chapters, the economy is not his policy strong suit. He has limited feel for financial markets or the complexities of macroeconomic management. Therefore, his recent major adjustments to China’s domestic economic growth model outlined in chapter 6, including the reemphasis of the state over the market, and his new restrictions on the Chinese private sector pose a real political danger to his leadership if growth, employment, or living standards were to stall. This, in my judgment, is Xi’s greatest liability, particularly given that his critics in the party leadership elite have previously championed a different economic policy strategy for China’s future.

For all these reasons, while China is likely to reach its year-end target of 6 percent economic growth in 2021, the era of high growth in China is over. Even ahead of Xi’s crackdown on the private sector and the Evergrande crisis, a consensus had emerged among global economists that China’s economic growth will probably slow to around 4 percent by 2025. This forecast deceleration also reflects China’s aging population, declining workforce, weak productivity growth, a negative trade environment, and high levels of official debt. Added to this is the as yet unknown impact of Xi’s macro pivot to public across the overall political economy at the potential expense of China’s hitherto remarkable culture of private-sector dynamism. Private-sector investment, both domestic and from foreign sources, is likely to slow further—stranded in a period of great uncertainty between Xi’s common prosperity campaign at home and the threat of US-China decoupling abroad.

China's Slow down by 2025

Nationalism is likely to add a new and potentially more volatile dynamic in the way that Chinese political elites respond to the United States

Nationalism Could be future ccp key

What is the likelihood of such a scenario coming to pass? On the balance of probabilities, Xi’s current prospects for success appear reasonable. However, this outcome depends on three critical variables. First, the success or failure of Xi’s adjustment of China’s domestic economic model in generating sufficient long-term, sustainable growth while avoiding social instability and also funding China’s large-scale military needs. Second, the success or failure of China’s new national technology strategy in closing the gap between Beijing and Washington on the critical technologies of the future—particularly artificial intelligence, semiconductors, and quantum computing. And finally, the ability or inability of the US system of divided democratic government to successfully rebuild American power at home and harness the collective energies of American allies abroad in order to meet the China challenge.

However, of all the moving parts at play in these scenarios, there are four in particular that should be analyzed most closely: three domestic economic factors and one external, where the policy settings lie largely in Chinese rather than American hands. The first remains the long-term sustainability of the emerging Chinese economic growth model, given Xi’s move to the left on Chinese economic policy, and the uncertain effects this will have on private-sector business confidence. The second is the extent to which China’s rapid demographic decline brings about earlier-than-anticipated impacts on domestic consumption, labor market cost, and government finances. The third is whether China can succeed in closing the semiconductor manufacturing gap between itself and the US and its allies, given that silicon chips underpin the future drivers of the global digital economy and military technology, including the unfolding artificial intelligence revolution. Finally, it remains to be seen how China will resolve its current internal dispute between its rising wolf warrior generation and its older traditional cadre of professional diplomats on how Chinese diplomacy should be conducted.

4 important moving parts in China's future

managed strategic competition.

Manage strategic competition

First, the United States and China must both develop a clear understanding of the other’s irreducible strategic redlines in order to help prevent conflict through miscalculation. Each side must be persuaded to conclude that enhancing strategic predictability advantages both countries, strategic deception is futile, and strategic surprise is just plain dangerous.

Understand redlines

Second, the two sides would then channel the burden of strategic rivalry into a competitive race to enhance their military, economic, and technological capabilities. Properly constrained, such competition aims to deter armed conflict rather than tempt either side to risk all by prosecuting what would become a dangerous and bloody war with deeply unpredictable results. Such strategic competition would also enable both sides to maximize their political, economic, and ideological appeal to the rest of the world. Its strategic rationale would be that the most competitive power would ultimately prevail by becoming (or remaining) the world’s foremost power—with Armageddon avoided.

Channel strategic rivalry

Third, this framework would create the political space necessary for the two countries to continue to engage in strategic cooperation in a number of defined areas where both their global and national interests would be enhanced by such collaboration—and indeed undermined by the absence of an agreed, collaborative approach.

Political space for strategic collaboration

The engine room of America’s global power remains its economy—its size, its innovation, its efficiency, its competitiveness, its influence on international standard-setting, its impact on global trade and investment, the depth of its capital markets, and the continuing global status of the US dollar. None of these historical economic strengths are set in stone, and all are now being challenged. For example, to compete effectively with China, America would need to reform and resume large-scale immigration to continue to grow its domestic market, just as it would need to expand its international markets through a new approach to regional and global trade liberalization.

America to re -engineer to remain at the top

However, this is not just a domestic economic policy challenge. It is equally an international economic policy challenge involving trade policy, the digital commerce revolution, and global digital governance. This would arguably be the most difficult component of any future US national China strategy: the greater opening of the American economy to its major strategic partners around the world. America has long prided itself on being one of the most open and globalized economies in the world. The truth is that it is not. Even before Trump’s orgy of protectionism, this was not the case. The tariff and nontariff barriers to free trade, investment, capital, technology, and talent markets are still formidable—even for America’s closest allies. The

Ameria not truly the land of freedom

The reality is that in this new age of strategic competition between China and the United States, there are, as a matter of logic, only two alternatives: managed competition, with some rules of the road and some prospect of preserving the peace, or unmanaged competition, with the loss of all strategic guardrails and the growing risk of crisis, conflict, or war.

Managed strategic competition or conflict is the choice

The reason for this book is that armed conflict between China and the United States over the next decade, while not yet probable, has become a real possibility. In part, this is because the balance of economic, military, and technological power between the two countries is changing rapidly. In part, it is because back in 2014, Xi Jinping changed China’s grand strategy from an essentially defensive posture to a more activist policy seeking to advance Chinese interests and values across the region and the world. It is also because, since 2017, in response to China’s newfound national power and policy assertiveness, the United States has embraced an entirely new China strategy in what both the Trump and Biden administrations have called this new age of strategic competition.

US China conflict not probable in decade but real possibility

“The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin.”

Sun Tzu's art of war important teachings