The Rise of China and Australia’s Security

The Defence White Paper of May 2013 is the latest in a long series of documents to address the dilemmas of Australian security. Most of them claim to introduce novel ideas and even exciting new weapons. Yet for all the technical innovations of recent decades as well as the huge political changes in Europe, the Middle East and Asia, the main principles of national security policy have remained much the same.

The latest White Paper lists four priorities, in order, for Australia’s defence. The first is the direct defence of Australia (and leaving aside for the moment number two, the security of the South Pacific), and that defence obviously depends, as it has always done, on the third and fourth priorities: the security of the general Indo-Pacific “region” and co-operation and participation with greater allies. Effective defence has always depended on up-to-date technologies in weaponry and intelligence. That, too, has depended on relations with greater allies, from British-made machine guns and artillery in the First World War to the new American aircraft now proposed and Australian access to an intelligence and nowadays cyber community whose origins go back to the Anglophone intel community created during and just after the Second World War. An exception may be the proposal to build a new class of submarines in Australia, though the precedent of the current Collins-class boats is hardly encouraging. In any case, that has probably more to do with introducing new machinery, technologies and skills into Australia, than with creating a fleet able to take on a major enemy, let alone of co-operating with the USA in distant waters, as Australia has long wanted.

There is nothing new, either, about the appearance of potentially hostile states or about worries as to how best to secure Australia’s independence and welfare. Many Australian ports, including Melbourne and Hobart, have the ruins of nineteenth-century defence batteries built to guard against the Russian fleet. Australia took part in the two world wars as a member in good standing of the British Empire, which was under obvious threat. Participation in wars in Korea, Vietnam and elsewhere also cemented an increasingly close alliance with the United States, which had begun to expand into the Pacific with its conquest of the Spanish Pacific empire in 1898. After 1945 the USA was in virtual command of the entire ocean.

In more recent times, however, three novel factors have appeared. One is the emergence of China as a political and economic power very much to be reckoned with. The second is a United States that seems increasingly tired of distant and inconclusive wars, of its role as an all-purpose global policeman (as distinct from moral exemplar) and understandably concerned with recovering from the financial crisis, which must be the precondition for a restoration of US influence and power. A third is the emergence of Australia’s substantial economic dependence on China. There has been much speculation about what these increases in China’s power might mean for its neighbours and for the entire Indo-Pacific balance. There have even been suggestions that Australia might come to be faced with an uncomfortable choice between that economic relationship with China and the strategic, economic and cultural links with the United States.

That view may, in many respects, be the very antithesis of what is actually happening. To begin with, China’s economic position has a number of fragilities. It is true Deng Xiaoping launched China onto a path of dramatic economic progress which has led to some three or more decades of GDP growth in the region of 10 to 11 per cent per annum, lifted hundreds of millions of Chinese out of poverty, started a population shift from the countryside into a series of new cities and in the process accumulated financial reserves which seem to have reached something over three trillion US dollars. At the basis of that economic advance was a stress on producing cheap manufactures for Western consumers with the use of apparently unlimited supplies of cheap labour. Together with trade came the accumulation of vast wealth in the industrial and coastal cities.

That pattern of development in China has run its course. It is being supplanted, amid great social stress, by more up-market manufacturing, rising wages in many and especially skilled areas, consumer spending and more infrastructure spending, not just on housing but on roads, railways and the like. There is also greater attention to increasing shortages of skilled labour, growing public unrest about the gross disparities of wealth in the new China and, perhaps even more importantly, the increasingly intolerable problems of air, soil and water pollution in many regions and cities. In addition, as openly admitted by some members of the new politburo, corruption within the all-dominant Communist Party has reached levels that can no longer be ignored, and is posing the most difficult problems. As Professor Rod MacFarquhar of Harvard recently noted: 

The upper ranks of Chinese society now constitute a robber baronage … [President Xi] intends to bind party and army tightly together, so that in an emergency the People’s Liberation Army would defend the party as it did in Tienanmen Square in 1989. 

The large numbers of local demonstrations, usually about malfeasance by local officials, create a kind of local buffer, somewhat insulating the higher levels of the Communist Party and government against local discontent. But Western publicity about the vast fortunes, both inside and outside China, amassed by some of China’s leading political families will be hard to ignore. They include the families of Mr Xi himself, of former President Hu Jintao, and of Bo Xilai, the recently disgraced boss of Chongqing and one of China’s best-known politicians until he fell from grace last year, when a close aide disclosed that his wife had murdered a British businessman. 

Economic growth has increased the general power and reach of the party and state, but has also led to the growth of strong local satrapies in the economy and elsewhere. For instance, state-owned enterprises have access to banks and credit normally denied to privately-owned firms. The heads of important industrial combines, or banks, or for that matter, of military regions or fleets, have acquired political clout. That does not necessarily lessen the reach of central power but it may well, at minimum, shape the conditions in which the head of the Party, or his colleagues on the Standing Committee of the Politburo, can operate. Manoeuvres in the highest reaches of the Party always occur “behind the curtain”, but observers can sometimes make inferences that turn out to be correct. Two points seem suggestive. One is that the Standing Committee—the point of highest political power—has been reduced from nine members to seven. The other is that the disgrace of Bo Xilai removed the senior politician who was not only one of the Party’s most widely known figures but was also one who most consistently favoured a Mao Zedong style of leadership. His fall might portend a period in which the Standing Committee could choose to operate in a more collegial fashion than its predecessor.

At the same time, the relegation of Maoism from policy-related discussion to formalities has left ideological and political gaps that seem, so far, to be inadequately filled. One element in the response has been fresh emphasis on an assertive nationalism. All Chinese children have it drummed into them that for the last two centuries China was cheated and oppressed by foreigners and exploited because it was weak. The exploiters came from the West and, of course, Japan, whose occupation of China has left especially bitter memories. (Much of the official story is neither true nor relevant, but that is neither here nor there.) So China must now “stand up” and be strong. China is a major world power and must behave accordingly. This “ideology” serves several purposes. One, of course, is to unite the country and persuade citizens to overlook the deep ethnic, religious, linguistic and other divisions in China. Another is to concentrate resentments on outsiders, not on Party officials, let alone national leaders.

The need for unity is by no means confined to citizen groups. There is not the slightest doubt that in the run-up to the governmental changes that have now brought Xi Jinping to the head of both Party and government there was (and to some extent may remain) fierce rivalry among important factions in the Party and the bureaucracy. The downfall of Bo Xilai is only one aspect of a struggle that was carefully hidden from public view. A policy of now having China “stand up” is one around which all segments of opinion and policy can unite. Nevertheless, it creates problems. For the last two or three years China has been making belligerent noises in various directions. One of the more serious points of friction is the dispute with Japan about a few bare rocks in the East China Sea, known to the Chinese as Diaoyu and the Japanese as Senkaku. There have even been hints that Japan’s Okinawa really belongs to China. Another concerns the ownership of islands and stretches of ocean in the South China Sea that China now claims as its quasi-territorial extension at the expense of the Philippines, Vietnam and others. There is even now a dispute with India about whose soldiers may camp where, given the undefined border between them in the less accessible parts of the higher Himalayas. More significant are repeated American complaints about the opacity of Chinese military and strategic planning and the aims China is developing for its growing military and naval capabilities. More important still are the accusations of Chinese military involvement in cyber attacks on American government targets.

China’s rapid military and especially naval modernisation is not just quantitative but also qualitative. It includes emphasising, for instance, defence against stealth aircraft and drones. Recent American assessments give special weight to China’s navy. China has not had a noteworthy navy since the fifteenth century. Its current naval expansion only started around the early 1990s and it takes much longer than twenty years to build up a trained and effective naval force. Still, the Pentagon thinks China may build several of its own aircraft carriers over the next fifteen years as well as up to twenty of the new Yuan-class submarines and up to a dozen ultra-modern destroyers. Such a build-up will give China not just status but also the ability to coerce its neighbours and the capacity to do much more to guard its own sea-lanes. It may also come to be a major American diplomatic objective to avoid the kind of competitive naval construction that was so destructive of Anglo-German relations before 1914 or Japanese-American ones in the 1920s. 

For the time being, Chinese official attitudes to all this seem to be relaxed. Beijing’s leaders are overwhelmingly concerned with the massive problems they face at home. But they also take the long view: that in the long term problems will often solve themselves; and anyway no one else can control China. As Mao said to President Nixon when they met in 1972: What does it matter if it takes a hundred years to solve the Taiwan problem? It is all very different from US and Western media-driven demands for problems to be solved immediately.

A major result of all this has been to encourage many of China’s neighbours, especially in South-East Asia, to lean closer to the United States. Which has, in turn, only confirmed the Chinese in their view that what the Americans (and Japanese) are doing in the Indo-Pacific region is meant to “contain” China and to limit its “rise”. In fact, there is little sign of any such thing. The much-discussed American “pivot” (more recently named “rebalancing”) towards the Pacific shows nothing of the kind. Leading Americans, including the President, have often said that a peaceful and wealthy China would be in everyone’s interests. It is in any case true that for the time being the US Navy remains the dominant naval power in the Pacific. Which makes it, among other things, the chief guardian of the sea-lanes on which Japan, South Korea and China itself, depend. The “pivot” is scheduled to include an increase of some ten US Navy ships to add to the fifty-two already deployed in the Pacific and Indian Oceans, including five of the US Navy’s ten aircraft carrier groups.

From an American point of view, it seems obvious that, given the peace and stability of the North Atlantic and the evident US wish to shed some of its Mediterranean and Middle Eastern burdens, such a shift is amply justified. With the major exception of Iran, the most important global flash-points at present seem to be those concerning China’s close ally, North Korea, and ones in the South China Sea which are of China’s own making. The Americans have made it clear that they have no intention of taking sides in the territorial disputes around that sea, but would insist on continuing freedom of peaceful transit of the high seas.

However, since the later 1980s China has indicated that it intends to develop its naval and other capabilities to command not just its own coasts but also the sea as far as the “first island chain”. In time, that command is to extend to the “second island chain”. The first chain refers to an archipelago stretching across the whole eastern seaboard of Eurasia; but centres on the Japanese islands, the Ryukyus, Taiwan and the Philippines. The second island chain is further out and centred on Guam. It seems wholly unlikely that Japan or the Philippines would consent to any such extension of the “Sinosphere”. Indeed, the Philippines authorities have already suggested that Japan— which already has the world’s fourth most powerful navy—should extend its military capabilities.

As for the Americans, they have already begun to prepare for an island chain of bases of their own and facilities that in some respects echo the “Nixon Doctrine” of 1969 and the US decision largely to withdraw from the Asian mainland to a sea- and island-based containment of what was at that time regarded as a Sino-Soviet communist world. This US island chain is likely to run from Japan and Okinawa to the Northern Marianas, including the major existing US base on Guam, from there across New Guinea to Australia (starting with the rotation of some US marines through Darwin), and from there to the Chagos Archipelago and Diego Garcia in the western Indian Ocean. It will also have outliers in Thailand, the Philippines and Singapore. The Americans insist that the new deployment of missile defences at Guam and in waters nearer Korea is simply to cope with threats from North Korea; though the Chinese have seen it as also directed against China’s own nuclear capabilities.

These military and naval plans must not be seen in isolation. There is much scientific and educational co-operation between the USA and China. American donors are giving several hundred million dollars to found scholarships in China for US students. There are over 200,000 Chinese students at US universities (including, at least until recently, President Xi Jinping’s daughter and Bo Xilai’s son, both at Harvard). The Chinese hacking of US industrial secrets may be as much a sign of China’s continuing inferiority in many aspects of industrial and technical competence, or of innovative capacities, as a sign of competition.

China continues to keep something like one trillion dollars worth of its reserves in US dollars, most of it in US Treasury bonds. The USA is the leader in the promotion of the “Trans-Pacific Partnership”, an ambitious free-trade agreement that groups members of the North American Free Trade Area with Asian countries, including Singapore and Japan. The Americans have hinted that China would be welcome and are also talking to Vietnam. However, China has created a Regional Comprehensive Economic Partnership to rival the TPP. Both pacts underline the competition between the USA and China for influence in Asia.

Where does all that leave Australia? China’s demand for iron ore and coal has played a key role in allowing Australia to weather the recent recession in good shape. Indeed, China has been in recent years Australia’s main customer, taking 29 per cent of all our exports, as well as being our main supplier, of 18 per cent of Australian imports. But that is not the whole story. China’s chief sources of imports are Japan, South Korea and the USA, with Australia fifth. China’s main export destination is the USA, followed by Hong Kong and Japan, with Australia eleventh. Australia’s biggest supplier of foreign investment by far is the USA (27 per cent) followed by the UK, Japan and Singapore, whereas Australia’s own overseas investments go mainly to the USA (35 per cent) followed by the UK, New Zealand and Canada. China is twelfth.

Beijing understands Australia’s position well enough. Its officials know that Australia is diversifying its economic base away from over-reliance on the mining and sale of coal, iron and gas; that Australia has no prospect of being self-reliant in the production and maintenance of advanced weapons and equipment, let alone in intelligence or strategic planning; and that in considering the likely future of the Indian Ocean and the entire Indo-Pacific region, not only does Australia look to a major American role but is aware that the Americans also need Australia for its geographic position, stable politics and long-established, reliable relations with Washington.

That being so, it is somewhat shaming that Australia has so often, in war and peace, ridden on America’s coat-tails and made contributions to common causes that are not just small but seem likely, given declining defence budgets, to shrink further. It is especially shaming that the Australian government has now reduced defence spending to pre-Second World War levels in order to pay for pre-election social service promises, or increases in the reach and power of central government. As the former Chief of the Defence Force, General Peter Cosgrove, has said: “Categorically no, Australia does not spend enough money on defence.”

The USA cannot always be part of the solution to every external problem that Australia should be able to sort out for itself. For instance, it is Canberra’s job to nurture Australia’s critically important friendship with Indonesia. It is also Australia’s job to balance, and perhaps contain, Chinese intrusions into several south-west Pacific island states. It has equally been Canberra’s job to remove the former absurdities of a refusal to sell uranium to India, destined to be the major naval power of the Indian Ocean. And it is certainly Australia’s task to deal with the security implications of the stream of real or alleged “asylum seekers” reaching Australian coasts.

What the unduly parsimonious allocations to defence, foreign affairs and intelligence also mean is that other governments, including China’s, cannot fail to notice the decline in Australian capabilities. The result can only be that Australia will be taken less seriously as interlocutor, let alone, partner, in developing the strategic framework for both the western Pacific and Indian Ocean regions. Yet these regions may well be over the next few decades the most sensitive and difficult in the world, and the ones that will most directly affect the security of Australia.