reporter2
02-10-21, 17:42
So, the US is back in Asia: What's next?
In the wake of a recent flurry of American initiatives, China needs to offer fresh selling points.
Ravi Velloor
Associate Editor
Sep 30, 2021
Anyone who has watched diplomacy and geopolitics unfold across Asia in recent months cannot miss the kinetic energy radiating from Washington, where the White House has pushed the State Department and the Pentagon to renew engagement with the region on an impressive scale.
The rush of activity has included US Vice-President Kamala Harris' visit to Singapore and Vietnam, just after Defence Secretary Lloyd Austin travelled to Singapore, Vietnam and the Philippines. Deputy Secretary of State Wendy Sherman has been around as well, showing up in Indonesia before moving on to Cambodia and Thailand.
The United States and the Philippines have renewed their Visiting Forces Agreement (VFA), which is key to maintaining their 1951 Mutual Defence Treaty.
Anyone who has watched diplomacy and geopolitics unfold across Asia in recent months cannot miss the kinetic energy radiating from Washington, where the White House has pushed the State Department and the Pentagon to renew engagement with the region on an impressive scale.
The rush of activity has included US Vice-President Kamala Harris' visit to Singapore and Vietnam, just after Defence Secretary Lloyd Austin travelled to Singapore, Vietnam and the Philippines. Deputy Secretary of State Wendy Sherman has been around as well, showing up in Indonesia before moving on to Cambodia and Thailand.
The United States and the Philippines have renewed their Visiting Forces Agreement (VFA), which is key to maintaining their 1951 Mutual Defence Treaty.
Although Philippine President Rodrigo Duterte had on several occasions vowed to terminate the VFA, it is now welcomed, thanks to Manila's worsening ties with Beijing over rival claims in the South China Sea.
Meanwhile, commentary in the Bangkok press suggests that Thailand - a US ally whose military rulers have lately built strong ties with China, including attempting a now-scrapped plan to buy Chinese submarines - is feeling neglected by the US, and wants back in with the crowd it knows so well.
Talk of America's clumsy pullout from Afghanistan seems to have evaporated from drawing room conversations around the region.
South-east Asians are beginning to acknowledge the attention they are getting from Washington.
"The Secretary of State has got preoccupations all over the globe, but you spent more than your fair share of bandwidth on Asean and engaging all of us in Asean, in South-east Asia, and I want to express a vote of thanks for that," Singapore Foreign Minister Vivian Balakrishnan told US Secretary of State Antony Blinken this week in Washington.
Last week, US President Joe Biden gathered leaders from three middle powers in the Indo-Pacific - the prime ministers of Japan, Australia and India - for a landmark in-person summit of the Quad, as the Quadrilateral Security Dialogue is known.
This came on the heels of the announcement of the Aukus alliance between the US, the United Kingdom and Australia, and the likely sale to Australia of eight nuclear-powered attack submarines.
The US is back. Not that the US had gone anywhere in the first place, just that its public diplomacy skills simply could not keep pace with Mr Donald Trump's chaotic presidency and its tendency to neglect key Asian institutions, leading to a perception that it was being pushed out from the region and could not do much about it.
Economic signals
In Singapore, for instance, the US continues to be the largest outside investor by a country mile, with firms like HP, Citi, DuPont and Google providing thousands of prized jobs. China is indeed the top trading partner in goods but the US remains ahead in services trade with Singapore - an often overlooked data point.
In Thailand, South-east Asia's No. 2 economy behind Indonesia, Japan reigns as the top source of foreign direct investment, outstripped by China only briefly in 2019 as the Thais received a flood of Chinese investments seeking to relocate production capacity after Mr Trump's trade war with Beijing.
Washington's thrust is backed by its own economic tailwinds. Data from the Institute for Supply Management (ISM) in Tempe, Arizona, suggests that the US economy has had 15 months of continuous expansion after contracting in April last year.
The ISM's New Orders Index registered 66.7 per cent last month - the latest figures available - increasing 1.8 percentage points from the July reading of 64.9 per cent. The Production Index registered 60 per cent, an increase of 1.6 percentage points compared with the July reading of 58.4 per cent.
And, according to economists at the Conference Board, the US economy could rack up total factor productivity (TFP) growth of 2 per cent this year - healthy for its size. TFP measures the amount of productivity of a company, or economy, that can be extracted from a unit of input.
Meanwhile, China's economic growth has been on a secular decline as its population ages and its investment-led strategy cries out for an upgrade.
The official growth rate dipped from the mid-teens just 15 years ago to 6 per cent in 2019 - the economy was slowing even before Covid-19 arrived. There has also been a steady slide in economic efficiency, meaning it takes more investment to produce a dollar's growth.
The International Monetary Fund estimates that China's TFP growth since the global financial crisis of 2008 averaged 2.25 per cent a year, which is only about half of its average in the decade before the crisis, hence the declining growth rate. Other estimates for Chinese TFP are even lower.
The recent ructions with property giant China Evergrande Group - property and real estate make up more than a quarter of Chinese gross domestic product - and curbs on the use of power, driven as much by shortages as President Xi Jinping's determination to cut emissions and build a more sustainable growth model, also have accentuated worries about the economy and China-centred supply chains.
Similarly, telecommunications giant Huawei's business has been significantly hurt after the US denied it the most sophisticated semiconductors.
Beijing's application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), therefore, is driven as much by strategic reasons as a realisation that to enjoy stronger growth, it is now essential for it to undertake a swathe of reforms that would give more room for market forces and to enhance international and domestic competition.
Strategic moves
While the US has put its cards on the table substantially - last week, the carrier strike group led by the USS Ronald Reagan was back in the region after spending three months in the Arabian Sea supporting the pullout from Afghanistan - the submarine deal with Australia shows there is no knowing if further strategic surprises are in store for Asia.
Increasing references to a "free and open Mekong" in American diplomatic chatter, for instance, suggest the contests playing out in the maritime commons could be extended to continental Asia in a coordinated way.
Of course, the missing link in its strategy is enthusiasm to join regional trade deals, but Washington probably figures it can wait on that. Besides, a free trade area of democratic nations that excludes China is no longer an unthinkable prospect.
But it is not about just trade. More worrisome plans are afoot.
Last week, the Quad unveiled plans to evolve joint principles on technology, underlining its ambition to work more closely on developing common standards and critical technologies of the future. According to a White House statement, future technology "should be shaped by our shared values and respect for universal human rights".
The efforts to separate the supply chains, to build a unique technology ecosystem in which China has no place, all have major strategic implications for the Asian region, particularly South-east Asia which is attempting to harmonise standards as part of economic integration.
Asia now awaits the Chinese response to these developments.
Chinese response
So far, Beijing has played off the back foot with concepts like "dual circulation" to cut its dependence on external markets and technology, decoupling technology firms from US financial markets and asserting party domination over all aspects of China's economy and society.
Externally, it has placed far too much emphasis on the trade relationships to stress its economic importance to the region and the world, and flashed its military muscle to make an occasional forceful point with Taiwan and Japan, which have seen Chinese military planes flying into their airspaces at will.
It is time for Beijing to put forth fresh selling points. What could they be?
With South-east Asia, China has made a tiny beginning by agreeing to discuss the Code of Conduct for the South China Sea with Asean as a bloc, rather than insisting on having the issue discussed only on a bilateral basis. It could help itself by not stalling on a legally binding code that will assuage not just the nations directly involved but also everyone else using the waterway.
With the Quad nations, easing sanctions on Australian exports and pressure on India along their contested Himalayan boundary would not be a bad start to a reset of ties.
China has already eased up on giving Western financial institutions and law firms more access than it has in the past. It needs to figure out if the gains from persisting with walling off the Internet in the country - decoupling wasn't an idea born in the White House as much as in Beijing - have aided its security or triggered suspicions about its intentions, leading to antagonism.
Needless to say, all this will depend on Beijing's determination of whether such policy adjustments would have any use at all. If the assessment is that the nations involved are likely to stay implacably opposed to its rise, there may not be much to gain by easing the pressures. However, what cannot be denied is that the current policies have not served China well.
Mr Biden's recent outreach to Mr Xi suggests that while he is preparing for the worst, he isn't averse to cooling things down, provided he gets the right signals from Beijing. He can ease Chinese insecurities by flagging his support for China's bid to join the CPTPP, key to its future prosperity, and by holding the Quad to its stated intentions of not being a containment device targeting China.
Last week, he told the United Nations that the US was not looking for a new Cold War. Biden aides who briefed reporters before the Quad summit insisted that the Quad was not a military alliance. That is sophistry - Quad navies just war-gamed together but under the Exercise Malabar label.
The durability of the US approach to China should no longer be in question. Despite the cheese-chalk differences in their personas, Mr Biden has followed through on a lot of what Mr Trump initiated. On some counts, Mr Biden has been tougher. He also must be flexible; a sullen, isolated China serves no one's interests.
For now, the pressure on him to keep the pressure on China is relentless. Indeed, voices regarded as generally sober are urging for more action to contain China.
Mr Chris Patten, Hong Kong's last British governor, recently called for British Prime Minister Boris Johnson to take the initiative to bring Canada and France into the Aukus fold.
In Germany, Chancellor Angela Merkel, who took a more nuanced view on China, is poised to leave office. Finance Minister Olaf Scholz, who has a good chance of succeeding her, has placed ties with the US as his top external priority, saying "democratic countries must cooperate... as the world becomes more dangerous".
Mr Scholz was not referring only to Russian President Vladimir Putin.
In the wake of a recent flurry of American initiatives, China needs to offer fresh selling points.
Ravi Velloor
Associate Editor
Sep 30, 2021
Anyone who has watched diplomacy and geopolitics unfold across Asia in recent months cannot miss the kinetic energy radiating from Washington, where the White House has pushed the State Department and the Pentagon to renew engagement with the region on an impressive scale.
The rush of activity has included US Vice-President Kamala Harris' visit to Singapore and Vietnam, just after Defence Secretary Lloyd Austin travelled to Singapore, Vietnam and the Philippines. Deputy Secretary of State Wendy Sherman has been around as well, showing up in Indonesia before moving on to Cambodia and Thailand.
The United States and the Philippines have renewed their Visiting Forces Agreement (VFA), which is key to maintaining their 1951 Mutual Defence Treaty.
Anyone who has watched diplomacy and geopolitics unfold across Asia in recent months cannot miss the kinetic energy radiating from Washington, where the White House has pushed the State Department and the Pentagon to renew engagement with the region on an impressive scale.
The rush of activity has included US Vice-President Kamala Harris' visit to Singapore and Vietnam, just after Defence Secretary Lloyd Austin travelled to Singapore, Vietnam and the Philippines. Deputy Secretary of State Wendy Sherman has been around as well, showing up in Indonesia before moving on to Cambodia and Thailand.
The United States and the Philippines have renewed their Visiting Forces Agreement (VFA), which is key to maintaining their 1951 Mutual Defence Treaty.
Although Philippine President Rodrigo Duterte had on several occasions vowed to terminate the VFA, it is now welcomed, thanks to Manila's worsening ties with Beijing over rival claims in the South China Sea.
Meanwhile, commentary in the Bangkok press suggests that Thailand - a US ally whose military rulers have lately built strong ties with China, including attempting a now-scrapped plan to buy Chinese submarines - is feeling neglected by the US, and wants back in with the crowd it knows so well.
Talk of America's clumsy pullout from Afghanistan seems to have evaporated from drawing room conversations around the region.
South-east Asians are beginning to acknowledge the attention they are getting from Washington.
"The Secretary of State has got preoccupations all over the globe, but you spent more than your fair share of bandwidth on Asean and engaging all of us in Asean, in South-east Asia, and I want to express a vote of thanks for that," Singapore Foreign Minister Vivian Balakrishnan told US Secretary of State Antony Blinken this week in Washington.
Last week, US President Joe Biden gathered leaders from three middle powers in the Indo-Pacific - the prime ministers of Japan, Australia and India - for a landmark in-person summit of the Quad, as the Quadrilateral Security Dialogue is known.
This came on the heels of the announcement of the Aukus alliance between the US, the United Kingdom and Australia, and the likely sale to Australia of eight nuclear-powered attack submarines.
The US is back. Not that the US had gone anywhere in the first place, just that its public diplomacy skills simply could not keep pace with Mr Donald Trump's chaotic presidency and its tendency to neglect key Asian institutions, leading to a perception that it was being pushed out from the region and could not do much about it.
Economic signals
In Singapore, for instance, the US continues to be the largest outside investor by a country mile, with firms like HP, Citi, DuPont and Google providing thousands of prized jobs. China is indeed the top trading partner in goods but the US remains ahead in services trade with Singapore - an often overlooked data point.
In Thailand, South-east Asia's No. 2 economy behind Indonesia, Japan reigns as the top source of foreign direct investment, outstripped by China only briefly in 2019 as the Thais received a flood of Chinese investments seeking to relocate production capacity after Mr Trump's trade war with Beijing.
Washington's thrust is backed by its own economic tailwinds. Data from the Institute for Supply Management (ISM) in Tempe, Arizona, suggests that the US economy has had 15 months of continuous expansion after contracting in April last year.
The ISM's New Orders Index registered 66.7 per cent last month - the latest figures available - increasing 1.8 percentage points from the July reading of 64.9 per cent. The Production Index registered 60 per cent, an increase of 1.6 percentage points compared with the July reading of 58.4 per cent.
And, according to economists at the Conference Board, the US economy could rack up total factor productivity (TFP) growth of 2 per cent this year - healthy for its size. TFP measures the amount of productivity of a company, or economy, that can be extracted from a unit of input.
Meanwhile, China's economic growth has been on a secular decline as its population ages and its investment-led strategy cries out for an upgrade.
The official growth rate dipped from the mid-teens just 15 years ago to 6 per cent in 2019 - the economy was slowing even before Covid-19 arrived. There has also been a steady slide in economic efficiency, meaning it takes more investment to produce a dollar's growth.
The International Monetary Fund estimates that China's TFP growth since the global financial crisis of 2008 averaged 2.25 per cent a year, which is only about half of its average in the decade before the crisis, hence the declining growth rate. Other estimates for Chinese TFP are even lower.
The recent ructions with property giant China Evergrande Group - property and real estate make up more than a quarter of Chinese gross domestic product - and curbs on the use of power, driven as much by shortages as President Xi Jinping's determination to cut emissions and build a more sustainable growth model, also have accentuated worries about the economy and China-centred supply chains.
Similarly, telecommunications giant Huawei's business has been significantly hurt after the US denied it the most sophisticated semiconductors.
Beijing's application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), therefore, is driven as much by strategic reasons as a realisation that to enjoy stronger growth, it is now essential for it to undertake a swathe of reforms that would give more room for market forces and to enhance international and domestic competition.
Strategic moves
While the US has put its cards on the table substantially - last week, the carrier strike group led by the USS Ronald Reagan was back in the region after spending three months in the Arabian Sea supporting the pullout from Afghanistan - the submarine deal with Australia shows there is no knowing if further strategic surprises are in store for Asia.
Increasing references to a "free and open Mekong" in American diplomatic chatter, for instance, suggest the contests playing out in the maritime commons could be extended to continental Asia in a coordinated way.
Of course, the missing link in its strategy is enthusiasm to join regional trade deals, but Washington probably figures it can wait on that. Besides, a free trade area of democratic nations that excludes China is no longer an unthinkable prospect.
But it is not about just trade. More worrisome plans are afoot.
Last week, the Quad unveiled plans to evolve joint principles on technology, underlining its ambition to work more closely on developing common standards and critical technologies of the future. According to a White House statement, future technology "should be shaped by our shared values and respect for universal human rights".
The efforts to separate the supply chains, to build a unique technology ecosystem in which China has no place, all have major strategic implications for the Asian region, particularly South-east Asia which is attempting to harmonise standards as part of economic integration.
Asia now awaits the Chinese response to these developments.
Chinese response
So far, Beijing has played off the back foot with concepts like "dual circulation" to cut its dependence on external markets and technology, decoupling technology firms from US financial markets and asserting party domination over all aspects of China's economy and society.
Externally, it has placed far too much emphasis on the trade relationships to stress its economic importance to the region and the world, and flashed its military muscle to make an occasional forceful point with Taiwan and Japan, which have seen Chinese military planes flying into their airspaces at will.
It is time for Beijing to put forth fresh selling points. What could they be?
With South-east Asia, China has made a tiny beginning by agreeing to discuss the Code of Conduct for the South China Sea with Asean as a bloc, rather than insisting on having the issue discussed only on a bilateral basis. It could help itself by not stalling on a legally binding code that will assuage not just the nations directly involved but also everyone else using the waterway.
With the Quad nations, easing sanctions on Australian exports and pressure on India along their contested Himalayan boundary would not be a bad start to a reset of ties.
China has already eased up on giving Western financial institutions and law firms more access than it has in the past. It needs to figure out if the gains from persisting with walling off the Internet in the country - decoupling wasn't an idea born in the White House as much as in Beijing - have aided its security or triggered suspicions about its intentions, leading to antagonism.
Needless to say, all this will depend on Beijing's determination of whether such policy adjustments would have any use at all. If the assessment is that the nations involved are likely to stay implacably opposed to its rise, there may not be much to gain by easing the pressures. However, what cannot be denied is that the current policies have not served China well.
Mr Biden's recent outreach to Mr Xi suggests that while he is preparing for the worst, he isn't averse to cooling things down, provided he gets the right signals from Beijing. He can ease Chinese insecurities by flagging his support for China's bid to join the CPTPP, key to its future prosperity, and by holding the Quad to its stated intentions of not being a containment device targeting China.
Last week, he told the United Nations that the US was not looking for a new Cold War. Biden aides who briefed reporters before the Quad summit insisted that the Quad was not a military alliance. That is sophistry - Quad navies just war-gamed together but under the Exercise Malabar label.
The durability of the US approach to China should no longer be in question. Despite the cheese-chalk differences in their personas, Mr Biden has followed through on a lot of what Mr Trump initiated. On some counts, Mr Biden has been tougher. He also must be flexible; a sullen, isolated China serves no one's interests.
For now, the pressure on him to keep the pressure on China is relentless. Indeed, voices regarded as generally sober are urging for more action to contain China.
Mr Chris Patten, Hong Kong's last British governor, recently called for British Prime Minister Boris Johnson to take the initiative to bring Canada and France into the Aukus fold.
In Germany, Chancellor Angela Merkel, who took a more nuanced view on China, is poised to leave office. Finance Minister Olaf Scholz, who has a good chance of succeeding her, has placed ties with the US as his top external priority, saying "democratic countries must cooperate... as the world becomes more dangerous".
Mr Scholz was not referring only to Russian President Vladimir Putin.