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China’s national health reforms over the past two decades have brought the system closer to the modern, safe, reliable, and accessible health system that is commensurate with China’s dramatic economic growth, improvement in living standards, and high hopes for the next generation.

China’s national health reforms of 2009—continuing many reforms undertaken since SARS (2003)—consolidated a system of social health insurance covering the entire population for basic health services, contributing to a surge in healthcare utilization while reducing out-of-pocket costs to patients – which declined from 56% to 28% of total health expenditures between 2003 and 2017. An expanded basic public health service package, funded by per capita government budget allocations that include a higher central government subsidy for lower-income provinces, provides basic population health services to all Chinese. Now the governance structure consolidates the purchaser role for social health insurance schemes under the National Healthcare Security Administration, with most other health sector functions under the National Health Commission. China’s world-leading technological prowess in multiple fields spanning digital commerce to artificial intelligence—and accompanying innovative business models such as WeDoctor that have not yet been fully integrated into the health system—hold promise for supporting higher quality and more convenient healthcare for China’s 1.4 billion.

However, many challenges remain, from dealing with COVID-19 and its aftermath to other lingering challenges, from promoting healthy aging to the political economy of addressing patient-provider tensions, changing provider payment to promote “value” rather than volume, and deciding which new medical therapies qualify as “basic” for the basic medical insurance schemes. To make China’s investments in universal health coverage and the accompanying rapid medical spending growth sustainable in the longer run, policies need to help the most vulnerable avoid illness-induced poverty, increase health system efficiency, strengthen primary care, and reform provider payment systems.

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Testimony before the U.S.-China Economic and Security Review Commission
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Karen Eggleston
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Cross-strait deterrence is arguably weaker today than at any point since the Korean War. Impressive Chinese military modernization, U.S. failure to build robust coalitions to counter Chinese regional aggression, and Xi Jinping’s personal ambition, all coalesce to create a situation in which Chinese leaders may see some aggregate benefit to using force. Mastro supports this assessment in her response to the Commission’s specific questions. 

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Statement before the U.S.-China Economic and Security Review Commission on “Deterring PRC Aggression Toward Taiwan”
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Oriana Skylar Mastro
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Diabetes is one of the fastest-growing health challenges of the 21st century. On the frontlines of the epidemic rise in the number of people with diabetes is the Asia-Pacific region. China, in particular, has by far the largest absolute burden of diabetes, with an estimated 116 million adults living with the disease accounting for one-quarter of patients with diabetes globally. By 2045, the number of adults living with diabetes in the country is expected to increase to 147 million, not including the large diaspora community China provides worldwide.

Evaluating the health and economic outcomes of diabetes and its complications is vital for formulating health policy. The existing predictive outcomes models for type 2 diabetes, however, were developed and validated in historical European populations and may not be applicable for East Asian populations with their distinct epidemiology and complications. Additionally, the existing models are typically limited to diabetes alone and ignore the progression from prediabetes to diabetes. The lack of an appropriate simulation model for East Asian individuals and prediabetes is a major gap for the economic evaluation of health interventions.

New collaborative research now addresses these limitations. The research team includes APARC’s Asia Health Policy Program Director Karen Eggleston. The researchers developed and validated a patient-level simulation model for predicting lifetime health outcomes of prediabetes and type 2 diabetes in East Asian populations. They report on their findings in the journal PLOS Medicine. 


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Modeling Health Outcomes Among East Asian Populations

The chronic progression to diabetes-related complications is apt for computer simulation modeling due to the long-term nature of health outcomes and the time lag for interventions to impact patient outcomes. It is problematic, however, to estimate the impacts of health interventions on East Asian populations with diabetes using existing models, which were developed and validated in European and North American populations with different epidemiology and outcomes.

To fill in this gap, Eggleston and her colleagues set out to develop and validate an outcomes model for the progression of diabetes and related complications in Chinese populations. They compared this new model, called the Chinese Hong Kong Integrated Modeling and Evaluation (CHIME), to two widely used existing models developed and validated in the United Kingdom (known as the United Kingdom Prospective Diabetes Study Outcomes Model 2, or UKPDS-OM2) and in the United States/Canada (called Risk Equations for Complications of type 2 Diabetes, or RECODe). Despite the continuum of risk across the spectrum of risk factor values, these two existing models ignore the progression from prediabetes to diabetes.

The CHIME integrates prediabetes and diabetes into a comprehensive model comprising 13 outcomes. These include mortality, micro- and macrovascular complications, and the development of diabetes. The researchers developed the CHIME simulation model using data from a population-based cohort of 97,628 participants in Hong Kong with type 2 diabetes (43.5%) or prediabetes (56.5%) from 2006 to 2017. Known as the Hong Kong Clinical Management System (CMS), this cohort makes one of the largest Chinese electronic health informatics systems with detailed clinical records. 

The CHIME outperformed the widely used United Kingdom Prospective Diabetes Study Outcomes Model 2 (UKPDS-OM2) and Risk Equations for Complications of type 2 Diabetes (RECODe) models on real-world data.
Karen Eggleston et al

The next step was to externally validate the CHIME model against individual-level data from the China Health and Retirement Longitudinal Study (CHARLS) cohort (2011-2018), a nationally representative longitudinal cohort of middle-aged and elderly Chinese residents age 45 and older. The researchers validated the CHIME model against six outcomes measures recorded in the CHARLS data and an additional 80 endpoints from nine published trials of diabetes patients using simulated cohorts of 100,000 individuals.

Towards Reducing the Disease Burden of Diabetes

The researchers found that the CHIME model outperformed the widely used UKPDS-OM2 and RECODe models on the data used, meaning that the validation of the CHIME model was more accurate for trials with mainly Asian participants than trials with mostly non-Asian participants. The results indicate that the CHIME model is a validated tool for predicting the progression of diabetes and its outcomes, particularly among Chinese and East Asian populations, for which the existing models have been unsuitable.

With the new model, clinicians and health economists can evaluate population health status for prediabetes and diabetes using routinely recorded data and therapies related to the long-term management of diabetes. In particular, the CHIME outcomes model enables them to assess patients' quality of life and measure cost per quality-adjusted life-years over the long-time horizon of chronic disease conditions. The new model thus supports the economic evaluation of policy guidelines and clinical treatment pathways to tackle diabetes and prediabetes, address micro- and macrovascular complications associated with these conditions, and improve life expectancy.

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In China, Better Financial Coverage Increases Health Care Access and Utilization

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A research team including APARC's Karen Eggleston developed a new simulation model that supports the economic evaluation of policy guidelines and clinical treatment pathways to tackle diabetes and prediabetes among Chinese and East Asian populations, for whom existing models may not be applicable.

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Background

Existing predictive outcomes models for type 2 diabetes developed and validated in historical European populations may not be applicable for East Asian populations due to differences in the epidemiology and complications. Despite the continuum of risk across the spectrum of risk factor values, existing models are typically limited to diabetes alone and ignore the progression from prediabetes to diabetes. The objective of this study is to develop and externally validate a patient-level simulation model for prediabetes and type 2 diabetes in the East Asian population for predicting lifetime health outcomes.
 

Methods and findings

We developed a health outcomes model from a population-based cohort of individuals with prediabetes or type 2 diabetes: Hong Kong Clinical Management System (CMS, 97,628 participants) from 2006 to 2017. The Chinese Hong Kong Integrated Modeling and Evaluation (CHIME) simulation model comprises of 13 risk equations to predict mortality, micro- and macrovascular complications, and development of diabetes. Risk equations were derived using parametric proportional hazard models. External validation of the CHIME model was assessed in the China Health and Retirement Longitudinal Study (CHARLS, 4,567 participants) from 2011 to 2018 for mortality, ischemic heart disease, cerebrovascular disease, renal failure, cataract, and development of diabetes; and against 80 observed endpoints from 9 published trials using 100,000 simulated individuals per trial.

The CHIME model was compared to United Kingdom Prospective Diabetes Study Outcomes Model 2 (UKPDS-OM2) and Risk Equations for Complications Of Type 2 Diabetes (RECODe) by assessing model discrimination (C-statistics), calibration slope/intercept, root mean square percentage error (RMSPE), and R2. CHIME risk equations had C-statistics for discrimination from 0.636 to 0.813 internally and 0.702 to 0.770 externally for diabetes participants. Calibration slopes between deciles of expected and observed risk in CMS ranged from 0.680 to 1.333 for mortality, myocardial infarction, ischemic heart disease, retinopathy, neuropathy, ulcer of the skin, cataract, renal failure, and heart failure; 0.591 for peripheral vascular disease; 1.599 for cerebrovascular disease; and 2.247 for amputation; and in CHARLS outcomes from 0.709 to 1.035.

CHIME had better discrimination and calibration than UKPDS-OM2 in CMS (C-statistics 0.548 to 0.772, slopes 0.130 to 3.846) and CHARLS (C-statistics 0.514 to 0.750, slopes −0.589 to 11.411); and small improvements in discrimination and better calibration than RECODe in CMS (C-statistics 0.615 to 0.793, slopes 0.138 to 1.514). Predictive error was smaller for CHIME in CMS (RSMPE 3.53% versus 10.82% for UKPDS-OM2 and 11.16% for RECODe) and CHARLS (RSMPE 4.49% versus 14.80% for UKPDS-OM2). Calibration performance of CHIME was generally better for trials with Asian participants (RMSPE 0.48% to 3.66%) than for non-Asian trials (RMPSE 0.81% to 8.50%). Main limitations include the limited number of outcomes recorded in the CHARLS cohort, and the generalizability of simulated cohorts derived from trial participants.
 

Conclusion

Our study shows that the CHIME model is a new validated tool for predicting progression of diabetes and its outcomes, particularly among Chinese and East Asian populations that has been lacking thus far. The CHIME model can be used by health service planners and policymakers to develop population-level strategies, for example, setting HbA1c and lipid targets, to optimize health outcomes.

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This commentary was first published by The Lowy Institute.


Two recent naval exercises demonstrate the potential for Russia-China cooperation in the Indian Ocean, and how the two present a much greater threat to a continued US role and influence in the region than either would individually.

Last year, South Africa hosted a maritime exercise with Russia and China, the first-ever trilateral exercise among the three countries. Exercise Mosi was designed, according to the South African Navy, to “enhance interoperability and maritime security“ and showed the three countries’ willingness to work together to counter security threats at sea, such as terrorism and piracy. There were the obligatory social and cultural activities, and then military maneuvers that focused on a surface gunnery exercise, helicopter cross-deck landings, boarding operations and disaster control exercises.

China and Russia followed this up in December 2019 with another trilateral maritime exercise with Iran in the Gulf of Oman called Exercise Marine Security Belt. The exercises included live-fire drills and an anti-piracy exercise involving Iranian commandos. According to the Iranian naval commander, the exercises’ message was that “Iran cannot be isolated.” A Chinese spokesman stated: “The naval drills aim to deepen exchange and cooperation among the navies of the three countries, and display their strong will and capability to jointly maintain world peace and maritime security”.

Both China and Russia have gradually been increasing their presence in the Indian Ocean. Russia recently announced it would establish a naval facility in Port Sudan on the Red Sea. China opened its first overseas base in Djibouti in 2017, and China’s navy has increased operations in the Indian Ocean region over the past three decades.


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The Covid-19 crisis may have slowed further moves towards cooperation this year. Moscow just hosted the 12th BRICS summit virtually, which doesn’t lend itself to deep military engagement. But the trilateral exercises are notable because they signal Moscow’s and Beijing’s desire to cooperate in the region. And more importantly, they reveal that regional powers such as South Africa and Iran, as well as other countries, welcome the increased role of China and Russia.

Relations between South Africa and the United States were already strained when Pretoria agreed to the trilateral exercises last year. Under the Trump administration, the United States grew critical of South Africa’s UN voting record. Washington also declined to exempt the country from hikes in tariffs on US imports of steel and aluminum. In contrast, China has pledged the most investments of any country in South Africa. Russia has followed in its footsteps in building political, military and trade ties across sub-Saharan Africa.

Iran has even more reason to build relations with China and Russia. Since the US withdrawal from the Iran nuclear deal in 2018, Iran has strengthened its ties to China and Russia, using multi-billion-dollar loans from the two countries to resist US sanctions and deepening defense cooperation and intelligence sharing.

Smaller countries can also find the Russia-China nexus useful. According to a Chinese-language source, Sudan, a long-standing regional partner of China, first proposed hosting a Russian base in 2017 as a counterbalance “against aggressive acts of the United States”.

In other words, China and Russia together may be better equipped to compete with the United States and its allies in the Indian Ocean region for influence, for several reasons.

Moscow may be more willing than Beijing to play the ringleader role in organizing and directing opposition against the United States, but it doesn’t have the economic heft to make such cooperation a winning proposition for Indian Ocean states.

While China has considerable resources, it is more concerned about provoking the United States and potentially worsening already poor relations. China often argues that it is a different type of great power, one that does not engage in hegemonic behavior such as alliance formation. China is also keen to avoid sparking a countervailing coalition against it.

For these reasons, Beijing often tones down its rhetoric about the nature of its relationship with Russia. China claimed the Indian Ocean exercises do “not target any third party”. For Russia, however, overtly undermining the United States is a key component of its strategy and plays well domestically for Putin.

On the other hand, China has the economic resources to wield influence and invest heavily in Indian Ocean countries. In Pakistan alone, Beijing has pledged an estimated $87 billion in funding and completed roughly $20 billion worth of projects. Recently, Beijing and Tehran reportedly agreed to a 25-year deal to expand China’s investment in Iranian banking, telecommunications, ports and railways in exchange for oil.

While China and Russia are nowhere near dominating the Indian Ocean region militarily, their combined influence may promise trouble for the United States and its partners. The two countries will likely work together to inure their partners to international pressure, including over human rights violations. And those partners will receive security benefits (such as military access) and economic benefits (such as preferential economic ties) in return. Although it seems a bit exaggerated, there is some truth to Iranian Admiral Hossein Khanzadi’s declaration that strategic coordination with Russia and China means “the era of American free action in the region is over”.

China and Russia may be slow in enhancing their strategic coordination in the Indian Ocean slowly, but the intent is there. The United States and its allies may still be dominant militarily. But we should be careful not to fall under the illusion that this guarantees influence. With China and Russia presenting themselves as strong alternative powers, the United States and like-minded countries have to work that much harder to promote sustainable economic development, protect international rules and norms, and ensure peace and security in the region.

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China’s South China Sea Strategy Prioritizes Deterrence Against the US, Says Stanford Expert

Analysis by FSI Center Fellow Oriana Skylar Mastro reveals that the Chinese military has taken a more active role in China’s South China Sea strategy, but not necessarily a more aggressive one.
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Russian President Vladimir Putin shakes hands with Chinese President Xi Jinping during a signing ceremony in Beijing's Great Hall of the People on June 25, 2016. (Photo by Greg Baker-Pool/Getty Images).
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Rhe US and its allies may have military dominance in the region, but it’s no guarantee of influence.

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Background

In an effort to provide greater financial protection from the risk of large medical expenditures, China has gradually added catastrophic medical insurance (CMI) to the various basic insurance schemes. Tongxiang, a rural county in Zhejiang province, China, has had CMI since 2000 for their employee insurance scheme, and since 2014 for their resident insurance scheme.

Methods

Compiling and analyzing patient-level panel data over five years, we use a difference-in-difference approach to study the effect of the 2014 introduction of CMI for resident insurance beneficiaries in Tongxiang. In our study design, resident insurance beneficiaries are the treatment group, while employee insurance beneficiaries are the control group.

Findings

We find that the availability of CMI significantly increases medical expenditures among resident insurance beneficiaries, including for both inpatient and outpatient spending. Despite the greater financial protection, out-of-pocket expenditures increased, in part because patients accessed treatment more often at higher-level hospitals.

Interpretation

Better financial coverage for catastrophic medical expenditures led to greater access and expenditures, not only for inpatient admissions—the category that most often leads to catastrophic expenditures—but for outpatient visits as well. These patterns of expenditure change with CMI may reflect both enhanced access to a patient's preferred site of care as well as the influence of incentives encouraging more care under fee-for-service payment.

This study is part of Karen Eggleston's research project Addressing Health Disparities in China

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This blog post was first published by the Australian Strategic Policy Institute's The Strategist analysis and commentary site.


The Quad is stronger than ever. The informal ‘minilateral’ grouping of Australia, India, Japan and the United States has in the past year held its first stand-alone ministerial meeting and its first leaders’ summit, and launched an ambitious project to deliver Covid-19 vaccines. This ‘golden age’ of the Quad is a product of newfound Indian enthusiasm for the grouping, in turn, spurred by the military crisis in Ladakh, where India faces ongoing Chinese troop incursions across the two countries’ disputed border.

But the Quad is not bulletproof. Some experts have suggested that the economic and diplomatic effects of the devastating second wave of the pandemic in India will preoccupy the Indian government, sapping the Quad of capacity for any new initiatives. Others counter that India remains committed to competition with China—which is what really matters for the Quad—although its partners always expected ‘two steps forward, one step back’ from India.


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Related: On the Conversation Six podcast, Tarapore discusses the policy paper on which this blog post is based with Jawaharlal Nehru University Professor of International Politics Rajesh Rajagopalan. Listen:


The pandemic may well prove to be a hiccup in the Quad’s evolution, but a potentially much larger disruption may come from the ongoing Ladakh crisis itself. As I argue in a new ASPI Strategic Insights paper, the crisis has greatly increased the risk of a border war between India and China, which would present a defining test of the Quad. A possible war could either strengthen or enervate the Quad—depending on how India and its partners, including Australia, act now to shape the strategic environment.

Risk is a function of likelihood and consequence. The likelihood of war on the India–China border is still low—both countries would prefer to avoid it—but has risen since the crisis began. Both countries have greatly expanded their military deployments on the border and backed them with new permanent infrastructure to resupply and reinforce them. China has proved its revisionist intent with large and costly military incursions, although its specific objectives and plans remain unknown. And the interaction of both countries’ military strategies and doctrines would, on the threshold of conflict, promote escalation.

The consequences of a possible conflict would be dire for both belligerents and for the region. China — assuming it is the provocateur of conflict—would likely face some political rebuke from states that consider themselves its competitors, but it will work strenuously to reduce those costs, and would likely have priced them in to its calculations of whether to fight. India will suffer high tactical costs on the border, and may also suffer wider harm if China uses coercive cyberattacks against strategic or dual-use targets.

In a costly war, the repercussions may spill over to damage India’s recently developing strategic partnerships, especially with the United States and Australia. Despite generally favorable views of the US, the Indian strategic elite still harbors some latent suspicions. This was highlighted in two episodes in April 2021, when the US Navy conducted a freedom of navigation patrol through the Indian exclusive economic zone, and when the US was slow in delivering Covid-19 vaccine raw materials and other relief. Both instances quickly receded from the Indian public imagination—thanks to quick correctives from Washington—but they did reveal that, under some conditions, Indian perceptions of its new partnerships can be quickly colored by distrust.

A China–India border war may create exactly those conditions. There is a chance that conflict may result in a redoubled Indian commitment to the Quad, if New Delhi judges that it has no option but to seek more external assistance. Conversely, unless a conflict is managed well by India and its partners, it is more likely to result in Indian disaffection with the Quad. India deepened Quad cooperation during the Ladakh crisis partly as a deterrent signal to China, and partly because the Quad is still full of promise. However, after a conflict—when China hasn’t been deterred and has probably imposed significant costs on India—the Quad’s utility would have been tested, and probably not ameliorated India’s wartime disadvantage.

The task before Quad governments is to be sensitized to this risk and implement mitigation strategies before a possible conflict, to buttress the coalition in advance. As I outline in the ASPI paper, they could do this at three levels. First, they could offer operational support—such as intelligence or resupply of key equipment, as the US already has done in the Ladakh crisis—although Quad partners’ role here would be limited. Second, they could provide support in other theatres or domains—with a naval show of force, for example, although cyber operations would probably be more meaningful in deterring conflict or dampening its costs. Third, they could provide political and diplomatic support — signaling to Beijing that a conflict would harm its regional political standing.

For Quad members, the main goal would be to deter conflict in the first place, and, failing that, to preserve the long-term strategic partnership with India for the sake of maintaining as powerful and energetic a coalition as possible to counterbalance China in the long term.

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Indian Prime Minister, Narendra Modi rides in a tank at Longewala in Jaisalmer, Rajasthan, 14 November 2020. | Press Information Bureau, Government of India
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The Ladakh crisis between China and India seems to have settled into a stalemate, but its trajectory could again turn suddenly. If it flares into a limited conventional war, one of its incidental victims could be the Quad.

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The Ladakh crisis between China and India seems to have settled into a stalemate, marked by somewhat reduced tactical tensions and continuing fruitless talks on disengagement—but its trajectory could again turn suddenly, even flaring into a limited conventional war. Despite a limited disengagement, both sides continue to make military preparations near the Line of Actual Control (LAC) to increase their readiness for potential conflict. While China proved its revisionist intent with its 2020 incursions, its specific goals and plans remain opaque. The broader political context is marked by distrust and hostility, and bilateral relations are at their lowest ebb in decades. War remains unlikely—both sides can ill-afford the distraction from higher national priorities and have demonstrated a recent keenness to step back from the brink. But, with growing capabilities and unclear intent, and with military operations no longer impaired by winter, the Ladakh crisis may still escalate to conflict.

The crisis has been full of surprises. Despite observing major military maneuvers in China, India didn’t anticipate the multiple incursions across the LAC in May 2020. For weeks thereafter, the Indian Army leadership insisted the incursions were nothing out of the ordinary. After both sides agreed to an early disengagement plan, the crisis took a shocking turn with a deadly skirmish in June — the first loss of life on the LAC in 45 years. India also mustered its own surprises, deploying troops to occupy tactically valuable heights in late August, to gain some bargaining leverage. And the crisis also abated with a surprise, with the sudden announcement of disengagement from heavily militarised stand-off sites around Pangong Tso Lake in February 2021.

Future surprises may yet occur. This paper argues that the risk of China–India conflict is significant because, even if its likelihood is low, its consequences may be considerable. A limited conventional war would be likely to impose significant costs on India, but, depending on the reactions of its partners, it may also reinforce latent Indian suspicions over the utility and reliability of its strategic partnerships. In that way, even a localized limited war on the LAC may have far-reaching implications, if it incidentally drives a wedge between India and its partners in the Quad. Mitigating that risk will require sound policy settings and astute diplomatic and public messaging from Canberra, Washington, Tokyo, and other like-minded capitals.

The remainder of this paper is in three parts: first, why a border war is plausible; second, what costs it would impose on India and how it might stir distrust of India’s Quad partners; and, finally, a framework to mitigate those risks.

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In collaboration with Global:SF and the State of California Governor’s Office of Business and Economic Development, the China Program at Shorenstein APARC presented session five of the New Economy Conference, "Navigating Chinese Investment, Trade, and Technology," on May 19. The program featured distinguished speakers Ambassador Craig Allen, President of the US-China Business Council; David K. Cheng, Chair and Managing Partner of China & Asia Pacific Practice at Nixon Peabody LLP; James Green, Senior Research Fellow at the Initiative for U.S.-China Dialogue on Global Issues at Georgetown University; and Anja Manuel, Co-Founder and Principal of Rice, Hadley, Gates & Manuel LLC. The session was opened by Darlene Chiu Bryant, Executive Director of GlobalSF, and moderated by Professor Jean Oi, William Haas Professor of Chinese Politics and director of the APARC China Program.

U.S.-China economic relations have grown increasingly fraught and competitive. Even amidst intensifying tensions, however, our two major economies remain intertwined. While keeping alert to national security concerns, the economic strength of the United States will depend on brokering a productive competition with China, the world’s fastest growing economy. Precipitous decoupling of trade, investment, and human talent flows between the two nations will inflict unnecessary harm to U.S. economic interests--and those of California.  

Chinese trade and investments into California have grown exponentially over the last decade. But they have come under increasing pressure following geopolitical and economic tensions between the two nations, particularly in the science and technology sectors. Ambassador Craig Allen, David Cheng, James Green, and Anja Manuel explored the role of Chinese economic activity in California in the context of the greater US-Chinese relationship. Watch now: 

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Ambassador Craig Allen, David Cheng, James Green, and Anja Manuel explore the role of Chinese economic activity in California in the context of the greater US-Chinese relationship.

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An Indian Army soldier stands in front of a group of People’s Liberation Army troops during joint drills

In May 2020, China launched several near-simultaneous incursions across the Line of Actual Control (LAC) in Ladakh, into territory hitherto controlled by India. Both sides reinforced their positions with tens of thousands of troops, engaged in a deadly skirmish, and reportedly came close to war. An agreement to disengage troops was announced in February 2021, but implementation has been halting. Regardless of how disengagement progresses, the crisis poses significant challenges for India’s long-term strategic competition with China.

As a result of the Ladakh crisis, India faces a new strategic reality in which China is a clear and abiding adversary. For India, the political relationship is now defined by hostility and distrust, and the LAC will remain more heavily militarised and violence-prone. Given this new reality, India is likely to further defer military modernisation and maritime expansion into the Indian Ocean. In the face of unremitting Chinese naval expansion, India risks losing significant political and military leverage in the Indian Ocean. At the same time, China appears to have escaped significant harm. Its better-resourced military could better absorb the material costs of the mobilisation. It may have been more concerned by the prospect of an increasingly hostile India, but the disengagement agreement has limited even those modest political costs.

The central policy challenge for India is balancing the heightened Chinese military threat on the northern border with the rapidly growing Chinese military presence in the Indian Ocean. It can manage this challenge by focusing on military strategies of denial rather than punishment, focusing on imposing political rather than material costs on China, and accepting more risk at the LAC in exchange for long-term leverage in the Indian Ocean region. How India responds will shape not only its strategic competition with China, but also the interests of likeminded partners including Australia, which depend on an increasingly capable and active India.
 

Key Findings

  • The still-unresolved Ladakh crisis has created a new strategic reality for India, marked by renewed political hostility with China, and an increased militarisation of the Line of Actual Control.
  • This new strategic reality imposes unequal costs on India and China. India is likely to defer much-needed military modernisation and maritime expansion into the Indian Ocean — which would impair its ability to compete strategically with China.
  • In contrast, China incurred only marginal material costs; it was probably more concerned with the prospect of continued deterioration in its relationship with India. Even that cost was more threatened rather than realised, and largely reduced when the disengagement plan was agreed.

 

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The Lowy Institute
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