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: 

The period in U.S. policy toward China that was broadly described as ‘engagement’ has come to an end, said Dr. Kurt M. Campbell, deputy assistant to the President and coordinator for Indo-Pacific affairs at the National Security Council, speaking at Shorenstein APARC’s 2021 Oksenberg Conference. “The dominant paradigm is going to be competition. Our goal is to make that a stable, peaceful competition that brings out the best of us,” he added.

This year’s Oksenberg Conference examined President Biden’s China strategy, how it might differ from that of the Trump administration, and how the United States can best pursue its values and interests amidst China’s rise in the Indo-Pacific. Campbell headlined the online event along with Laura Rosenberger, special assistant to the President and senior director for China and Taiwan at the National Security Council. Following their remarks, Campbell and Rosenberger joined the Freeman Spogli Institute Director Michael McFaul for a fireside chat. Watch their statements and discussion:

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Shifting Strategic Focus

The lion share of history in the twenty-first century will be written in Asia, noted Campbell, and for the first time the United States is earnestly shifting its strategic focus, economic interests, and military might to the Indo-Pacific. America’s approach to the region has been underpinned by the post-WWII narratives of a U.S.-led international order centered around deployed engagement to preserve stability and peaceful conflict resolution, economic openness, and multilateralism. Now this U.S.-led ‘operating system of the Indo-Pacific’ is challenged.

Over the past several years, Beijing has signaled its determination to play a more assertive role on the international stage. Across the board, said Campbell, we have witnessed examples of China’s shift to “harsh power, or hard power” and its strategically destabilizing impacts — from the conflict on India’s northern border to an “undeclared economic campaign” against Australia, “wolf warrior” diplomacy, stepped-up military interactions in the South China Sea, regular military actions across the Taiwan Strait, and increasing pressure on Japan.

“We all understand that China, as a rising power, takes issue with certain elements of the existing, dominant system and wants to revise them,” Campbell said. “We believe that the best way to engage a more assertive China is to work with allies, partners, and friends.”

Granted, no country is eager to pick sides in the U.S.-China rivalry, he added, and, in the post-Trump era, “one of the biggest challenges of the Biden administration is to try and underscore and reassure allies and friends that we’re going to continue our stabilizing role.”

Three Pillars of U.S. China Policy

Working with allies and partners, which is one of the three pillars of the Biden administration’s China policy, is not about building an anti-China coalition, emphasized Laura Rosenberger. “What we are seeking to do is to show that democracies deliver” and work for the benefit of the American people and the world’s people. “That provides a competitive counteroffer” to China’s more coercive ways of engagement with its counterparts and its efforts to reshape rules in ways that threaten democracies.

Another pillar of the Biden administration’s China policy, Rosenberger explained, is investing at home and strengthening ourselves domestically. The need to do so is especially urgent not only due to the health and economic devastation caused by the COVID-19 pandemic but also in response to intractable challenges in American society — such as economic disparities and the cracks in our democracy — and to the imperative to out-innovate and outperform China in the technology space, where much of the competition between the two powers lies.

The third aspect of U.S. policy towards China, said Rosenberger, is “Countering China where we need to and cooperating with China where it is in our interest to do so. We think this is how we can manage competition in a way that will prevent us from moving into conflict but that will allow us to maximize cooperation.” She noted that this approach has already played out in the initial high-level engagements of the Biden team with Beijing.

The Quad and Beyond

Still, Campbell admitted, the United States will need to recreate elements of its power, dispel fears of American decline in the international arena, and convince the entire Indo-Pacific of its determination to continue to play a leading role on the international stage. It also must have a positive economic vision for its engagement in the region. 

“The operating system of the Indo-Pacific is under substantial strain,” he said. It will need to be reinvigorated not just by the United States but also by other countries that use it, including Japan, South Korea, Australia, and countries in Europe that want to do more in Asia.

“Our goal is to enhance deterrence,” concluded Campbell, and to bring other countries into the effort. “We’re ambitious about the Quad,” he said, noting that the Biden administration is looking to convene an in-person meeting of its Quad partners in the fall and underscoring the administration’s willingness to welcome into its efforts “other countries that believe that they’d like to engage and work with us.”

Media Coverage of the Conference

• Bloomberg Politics
• Bloomberg News
• Forbes
• Reuters
• Japan Times
• South China Morning Post
• CNA
• NPR
• The Diplomat
• The Straits Times

About the Oksenberg Conference

Sponsored by Shorenstein APARC and led by the China Program, the annual Oksenberg Conference honors the legacy of the late Professor Michel Oksenberg. A renowned China scholar who urged the United States to engage with Asia in a more considered manner, Oksenberg was a senior fellow at APARC and FSI and served as a key member of the National Security Council when the United States normalized relations with China. In his tribute, the Oksenberg Conference recognizes distinguished individuals who have advanced the understanding between the United States and the nations of the Asia-Pacific.

On May 5, 2021, the APARC China Program hosted Professor Yuen Yuen Ang, Associate Professor of Political Science at the University of Michigan for her program, "The Role of Corruption in China's Speedy, Risky Boom." Based on her recently published book, China's Gilded Age, Ang explored the impact of corruption on China's economy and how it compares to other countries around the world, including the United States during the late 1800s. Professor Jean Oi, William Haas Professor of Chinese Politics and director of the APARC China Program, moderated the event.

While corrupt countries are usually poor, China appears to be an exception. President Xi Jinping acknowledges that corruption in the country has reached crisis proportions. If this is true, Ang asks, why has China nevertheless sustained 40 years of economic growth and deep transformation?

In fact, Ang argues, China is not as anomalous as it seems; its experience is strikingly similar to America’s Gilded Age during the 19^th century. Ang unbundles corruption into four different types that each harms the economy in a different way. Similar to America’s Gilded Age, reform-era China has steadily evolved toward a particular type of corruption: access money (elite exchanges of power and wealth). Simultaneously, beginning in the 2000s, the central government effectively curbed directly growth-damaging types of corruption such as embezzlement and bureaucratic extortion. Access money fueled commerce by rewarding politicians for aggressively promoting growth and connected capitalists for building more and taking on more risky ventures. But such corruption also produced systemic risks, distortions, and inequality—problems that define China's Gilded Age under Xi's leadership. As a result, China today is a high-growth but risky and imbalanced economy.

Despite popular perceptions that China and the United States are two polar opposites, Ang argues, contemporary China and 19th century America share more similarities than we normally think. Their divergent political systems, however, drove contrasting responses to the excesses of capitalism. Watch now:

This commentary by Kiyoteru Tsutsui and Charles Crabtree was originally published in The Hill.

The recent White House summit meeting between President Biden and Japanese Prime Minister Yoshihide Suga signaled to the world, and especially to China, that the U.S.-Japan alliance is strong and ready for intensifying competition in Asia.

For the first time in more than 50 years, the Japanese and American leaders mentioned Taiwan in their joint statement. China immediately responded with strong words, as expected, but since has moderated its tone. Furthermore, Chinese leader Xi Jinping participated in the U.S.-organized Leaders Summit on Climate the week after the Biden-Suga meeting and took a collaborative stance, a hopeful sign that competition will not eliminate the possibility of some collaboration and that climate change is an area where Beijing, Tokyo and Washington can work together.

But the U.S. and Japan still have at least three concerns about China: Beijing’s continued posturing on Taiwan and the Senkaku Islands; its significant leverage in economic relations; and its repression of human rights in Xinjiang, Hong Kong and beyond. How should the alliance handle these important issues? 

On the security front, America’s return to multilateralism under Biden is a welcome development for Japan and other like-minded states in the region. The U.S.-Japan alliance is obviously central in the coalition of democratic nations concerned about China’s ambitions. The primary goal of these countries ought to be walking the thin line between demonstrating their resolve to counter any aggressive behavior by China with force and avoiding any unnecessary provocation against China. 

Toward that end, the most promising framework is the Quad that includes India and Australia in addition to Japan and the U.S. The first-ever leader-level meeting in March elevated the Quad’s status significantly. While it still is a long way from becoming a NATO-like security apparatus — and it’s not even clear if that’s the consensus goal — it could help stabilize the region by creating a credible counterweight to check China’s territorial ambitions.

Beyond the Quad, the inclusion of other like-minded stakeholders such as South Korea and ASEAN countries on security matters is important. With South Korean President Moon Jae-in’s visit to Washington planned in late May, a good first step for the Biden administration would be to invest some diplomatic capital in mending fences between Japan and South Korea. A full-scale reconciliation between the two regional powers is unlikely this year; Suga faces elections in the fall, for which he needs to consolidate the conservative base, and Moon is a lame duck with limited political power. But some reconciliation would be welcome for the U.S. as it seeks to resurrect the trilateral alliance with Japan and South Korea to complement the Quad in deterring China’s ambitions and addressing the threat posed by North Korea. 

In the economic domain, China is arguably even more difficult to contain, being the largest trade partner for virtually all the countries in the region. Decoupling from China was a key theme at the Biden-Suga summit, but this is a task that has proven much easier said than done. From semiconductors to rare earth minerals, the battle for key materials for the 21st century economy will only intensify, and China’s grand scheme in the Belt and Road Initiative needs to be countered by a similarly grand long-term strategy that would flesh out the Free and Open Indo-Pacific vision.

In this regard, the U.S.-Japan Competitiveness and Resilience Partnership can be quite consequential. In addition to pledging cooperation on “sensitive supply-chain” issues, it outlines the agenda for technological innovation that cuts across security and economic domains, making it a critical tool in the competition with China. This is because whoever develops an edge in transformational technologies — such as artificial intelligence, 5G infrastructure, and outer space development — will enjoy diplomatic and military advantages as well as economic profits. The combined $4.5 billion investment in the partnership is a good first step to ensuring that the U.S. and Japan retain an innovation advantage. Additional expenditures likely will be necessary, though, considering China’s commitment in these areas.

On human rights, Japan and America take different approaches. While the U.S. has called the situation in Xinjiang a genocide and imposed sanctions there, as well as in Myanmar following the military coup, Japan has taken a more subdued stance. This is a standard approach for Tokyo, which prefers to emphasize engagement with violating governments.

The Biden administration seems to accept Suga’s strategy of engagement, and perhaps the diplomatic channel that this approach provides can be useful in negotiating some kind of settlement. However, the strategy of engagement that has produced some benefits in countries such as Thailand and possibly Myanmar is unlikely to be as effective with China. Furthermore, several Western corporations are facing boycotts in China for taking a stand against forced labor in Xinjiang. If Japanese corporations avoid paying the price and continue business as usual, Tokyo might face greater pressure to take some action. Given the central importance of the Chinese market for Japanese businesses, this could give rise to significant tension between Tokyo and Washington. 

On all these dimensions, for Japan and the U.S. to be effective in countering China, both Biden and Suga would have to consolidate domestic support. Biden’s first 100 days generally were seen as successful, with COVID-19 vaccine distribution going smoothly and Congress passing ambitious spending bills. Besides, Biden has at least until the midterm elections in November 2022 to move things forward.

The timetable is less friendly for Suga, who needs to win the Liberal Democratic Party (LDP) presidential election in September and hold a House of Representatives election by October. His fate will be shaped in large measure by his government’s pandemic response and how that influences economic fortunes, and to a lesser extent the success of the Tokyo Olympics. Most Tokyo insiders predict that he will remain in office past October, citing weak opposition both in and outside of the ruling LDP. If, however, COVID-19 vaccine distribution does not move forward by the fall, as projected by the government, and the economy continues to slide, that could still trip him up.

Only with domestic political stability and economic prosperity can Tokyo and Washington take the next steps in projecting strength vis-à-vis China, and that is the best deterrent against China’s expansionist ambitions and toward ensuring peace and stability in the Indo-Pacific area.

On April 21, 2021, the APARC China Program hosted Professor Erin Baggott Carter, Assistant Professor in the Department of Political Science and International Relations, University of Southern California, and Visiting Scholar at the Stanford Center on Democracy, Development and the Rule of Law. Her program, "When Beijing Goes to Washington: Autocratic Lobbying Influence in Democracies," explored how lobbying from China and China-based companies can affect policy in the United States. Professor Jean Oi, William Haas Professor of Chinese Politics and director of the APARC China Program, moderated the event.

Professor Baggot Carter based her talk on a dataset drawn from the public records of the US Foreign Agents Registration Act, which includes over 10,000 lobbying activities undertaken by the Chinese government between 2005 and 2019. According to Baggot Carter, the evidence suggests that Chinese government lobbying makes legislators at least twice as likely to sponsor legislation that is favorable to Chinese interests. Moreover, US media outlets that participated in Chinese-government sponsored trips subsequently covered China as less threatening. Coverage pivoted away from US-China military rivalry and the CCP’s persecution of religious minorities and toward US-China economic cooperation. These results suggest that autocratic lobbying poses an important challenge to democratic integrity. Watch now: 

This op-ed by Kiyoteru Tsutsui originally appeared in Nikkei Asia.

In one of the few unscripted moments in the meticulously planned U.S.-Japan summit meeting last Friday, President Joe Biden referred to Prime Minister Yoshihide Suga as "vice president" before quickly correcting himself.

In a different era, this could have turned into a diplomatic incident, with right-leaning Japanese pundits calling it evidence of the U.S.'s patronizing approach to Japan. Fortunately for Biden, the current geopolitical environment is not conducive to such provocation, and no major media picked up on the slip.

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Much has been made of Suga being the first foreign leader to meet Biden in person. According to the U.S. State Department Office of the Historian, this is only the second time ever that a Japanese prime minister became the first foreign leader to meet a new president in the White House.

The other time was in 1989, when Prime Minister Noboru Takeshita visited President George H.W. Bush. Back then, Japan was a major threat to U.S. economic hegemony. Today, China is that threat, and not just in the economic domain. China is the first bona fide competitor to the U.S. since the Soviet Union, and its threat extends to every nook and cranny of the globe.

To counter China's ascension, the U.S. needs its allies, and Japan is the most important partner for that purpose. This is the context in which Suga visited the White House despite all the COVID-related restrictions.

Not surprisingly, the statements were carefully crafted to send strong signals to China. Building on the two-plus-two dialogue in March, the joint statement touched on the importance of peace and stability in the Asia-Pacific, from the East and South China seas to even Hong Kong, Xinjiang and Taiwan.

Japan certainly wanted a reference to the Senkaku Islands, which Beijing claims and calls the Diaoyu, and the applicability there of Article V of the U.S.-Japan Treaty of Mutual Cooperation and Security. The Biden administration had made that commitment earlier, calming concerns among Japanese leaders that the new administration may be softer on China than the Trump administration.

Biden has, in fact, been quite tough on China and has given almost a perfect answer to what Japanese foreign policymakers wanted. In return, the U.S. wanted Japan to be squarely on Washington's side. The wording of the joint statement — negotiated until the last minute — saw Japan agree to include a reference to Taiwan for the first time in 52 years, but with Japan's preferred wording, encouraging "the peaceful resolution of the cross-Strait issues."

Predictably, China reacted quickly and strongly, accusing the two countries of interfering in its domestic affairs and warning Japan about siding with the U.S. We have yet to see what retaliatory actions China might take, but the reference to Taiwan signals the beginning of a new trilateral relationship between China, Japan and the U.S.

The summit covered other important issues, all with China in the background. One key issue is economic security. In particular, supply chain decoupling will become a battle cry for the U.S. and its allies as they seek to reduce dependence on materials from China. Semiconductors are especially critical, as they power all the major growth areas in the new economy. Taiwan's dominance in the semiconductor industry is the main reason why Taiwan is so important to both sides.

To remain in the driver's seat in the new economy, the joint statement announced a new U.S.-Japan Competitiveness and Resilience (CoRe) Partnership. The most concrete proposal was an initial commitment of $4.5 billion from the two governments toward fifth generation (5G) and 6G networks, reflecting concerns about China's dominance in the key digital infrastructure of the future.

Human rights is another thorny issue, with the joint statement specifying concerns over Xinjiang and Hong Kong. With some companies joining the boycott campaign on cotton from Xinjiang, and China countering by criticizing racial division in the U.S., the clash between China and the U.S. will intensify in this area as well. Japan has stepped out of its comfort zone and criticized China on human rights, following the American approach more explicitly than before. In this regard, it is notable that Suga also referred to rising violence against Asians in the U.S.

One area in which China might be more of a partner than a competitor is climate change, with all three countries committing to zero emissions by mid-21st century. Almost concurrently with the Biden-Suga meeting, American and Chinese climate envoys — John Kerry and Xie Zhenhua — met in China and issued a joint statement affirming their commitment to work together on global climate challenges.

All these initiatives and commitments are potentially meaningful and consequential developments that can reshape the Indo-Pacific, although more concrete ideas are needed before we can evaluate their impact. The biggest take-away ought to be the confirmation that the U.S.-Japan alliance is gearing up for a new era of competition with China.

Japan more than reaffirmed its commitment to the alliance with the U.S., risking its economic relations with China. The U.S. will be sure to ask for more concrete actions from Japan on the basis of the joint statement, and Japan can no longer evade questions about what it would do in a confrontation with China. Japan has to navigate a tough terrain of standing with the U.S. in the competition with China while preventing the escalation of tensions between Beijing and Washington, and at the same time protecting its own national interests.

A new phase of the trilateral relationship has just begun, and like it or not, other Asian nations might face the same decision that Japan faced, and sooner rather than later.