The Contest of the Century (3 page)

Competition between the U.S. and China is usually thought of in terms of the location of a factory or the value of exchange rates, but that is rivalry at the retail level. The real contest for power and influence is over the geopolitical high ground: the rules, institutions, and power dynamics which dictate how the world really works. The core of this book will be about the three different fronts on which the competition will take place—military, political, and economic.

The first section focuses on the military contest in Asia, where China’s new navy is beginning to challenge the dominance of the U.S. in the western Pacific, setting up one of the defining stories of the coming decades. The tussle that is developing for control of the seas surrounding China is in some ways the central contest, because naval power can create the conditions to shape political and economic realities.
Chapter 1
will look at the reasons behind China’s naval modernization, the historical and geopolitical anxieties together with the changing role that the military occupies within the Chinese system.
Chapter 2
looks at whether China will seek to strike out as a naval power into the Indian Ocean, and
Chapter 3
examines the deep backlash that China has provoked in Asia.
Chapter 4
analyzes America’s response to China’s Asian ambitions.

The second section examines the political challenge that China is now presenting. One chapter looks at China’s huge investments in soft power; other explores the impact that China’s rigid ideas about state sovereignty are having on the way human rights are treated by the international community. Before that,
Chapter 5
provides a slight detour into the psychology of China’s new assertiveness, looking at the particular form of nationalism which has sprung up over the last two decades and which is the emotional crutch for the desire to challenge the West.

The final section focuses on two different ways in which China is threatening to rewrite the rules of the global economy, first through its plans to challenge the U.S. dollar, and second through the coming boom in Chinese finance and investment, which has the potential to reshape globalization.

——

Of course, Beijing is not the only capital gripped by talk of American decline. Washington, too, is full of fin-de-siècle anxiety, the result of
the global financial crisis which laid bare a wealth of much deeper, unresolved problems in the economy and a political system that seems allergic to addressing long-term problems. “The Desperate States of America,” as the German magazine
Der Spiegel
calls the U.S.; or, as the former Morgan Stanley analyst David Roche puts it,
“Wall Street’s crack-up presages a global tectonic shift: the beginning of the decline of American power.” America’s huge budget deficits and debt levels mean that the risk of a much deeper crisis and a collapse in the credibility of the U.S. dollar is a very real one. And all this is taking place while Washington watches the seemingly unstoppable rise of China. It has become a favorite parlor game among economic pundits to predict the year when the Chinese economy will overtake the U.S. to become the biggest in the world. Some believe it could happen within a decade.

The declinists are correct about two things. America’s ability to project power will depend on bringing its long-term debt under control and restoring its reputation as the most innovative large economy in the world. A decade of economic stagnation would derail many aspects of its foreign policy. It is also clearly true that the world has changed in important ways. China’s rise is only the most visible example of a diffusion of economic power toward the developing world, which includes India, Brazil, Indonesia, and a host of other nations. The unipolar era that the U.S. enjoyed after the end of the Cold War was always an aberration, and it is quickly coming to an end. If the U.S. strives to maintain the kind of military dominance it has enjoyed for the last two decades, installing China as the new enemy to scare up budgets, it will be in big trouble. Yet the obsession with the
sorpasso
moment, when China’s economy becomes the world’s biggest, confuses the way power is wielded in international politics. There will be no new military parade in Beijing on the day when China’s economy overtakes that of the U.S., no handover ceremony to usher in a new leader. Power and influence are not transferred, like a property title: they have to be earned.

When you start looking at the world through Chinese eyes, it is striking how deeply entrenched American influence begins to appear, and how difficult it will be for China to overturn it. America’s alliances are solid and its core political values still widely shared. At the same time, with a political system that strangles creativity, China lacks the tools
to project around the world its own ideas about good governance and the good life. The market for Chinese military and diplomatic power is also much smaller than many in Beijing realize, especially in Asia. The harder China pushes, the more likely it is that a coalition of neighbors will emerge, with the U.S. at the helm, to restrain its ambitions. China risks becoming a very lonely great power.

Instead of American decline, the bigger question is whether Washington can sustain broad international support for the system of free trade, freedom of navigation, and international rules it put in place after the Second World War. The rise of China and the other new powers means a return to a world where a balance of power is the natural state of affairs, with the U.S. still the most important nation but unable to dictate terms. Instead of rigid alliances, there will be fluid coalitions that shift depending on the issue. On occasion, China and the U.S. will be on the same side, but more often than not they will be opposed and Washington should have no illusions about China’s willingness to push back against American leadership. The most influential state will be the one that is best at setting agendas, mobilizing support, and which comes across as the more reasonable. This should be an environment that suits the U.S., which for decades has shown a flair for the patient work of sustaining alliances and coalitions. But Washington will have to find new ways to work together with Europe, which will remain a natural partner, and to establish stronger ties with India, Brazil, and some of the other new swing voters of international politics. If the U.S. wants to retain its role at the center of international affairs, it will have to convince enough countries that its ideas still work. A quest for continued military dominance will not do the trick: Washington needs to enlist new partners. This is the real challenge that China laid down at its National Day parade in Tiananmen Square.

Section I
MILITARY IN ASIA

T
O THE LIST
of industries now dominated by China, there is one surprising new entry: Miss World. Beauty contests were banned in China by Mao Zedong as one of the worst forms of Western decadence, but their bland internationalism appeals to modern China’s desire to be included. Of the last nine Miss World pageants, five have been held in China, all at the seaside resort of Sanya, on subtropical Hainan Island, off China’s south coast. Sensing a great way to boost tourism, the local government spent $30 million to build a special venue for the contest, the Beauty Crown Theater, a huge arena near a man-made beach which is shaped like, well, a crown. When it opened in 2003, the winner was Rosanna Davison, a nutritional therapist from Dublin whose father, Chris de Burgh, wrote the syrupy global smash hit “Lady in Red.” Qi Guan, a Chinese model who wore a flowing red ball-gown for the evening’s finale, was the second runner-up. Her compatriot Zhang Zilin went one better in 2007, winning China’s first Miss World title.

When the Miss World show is in town, the swimsuit photo shoots take place across the road, at the Sanya Sheraton Hotel, which looks out onto the white sands of Yalong Bay, a crescent-shaped cove lined with palm trees. With a Ritz-Carlton on one side and a Marriott on the other, Yalong Bay is a transplant of multinational tourism on China’s southernmost point. The resort has become hugely popular with prosperous
Chinese families, who escape the urban grind for a few days of sun that before would have required a trip to Thailand. On the beach, I met one couple from Jiangxi Province who were sporting his and hers Hawaiian shirts and shorts. On the winter day when I traveled, it was minus nine degrees Celsius (not quite sixteen degrees Fahrenheit) when the plane left Beijing, and a balmy twenty-three degrees Celsius when we arrived three hours later in Sanya, a reminder of the continental size of China. The Sheraton is also a popular escape for well-to-do Russians living in eastern Siberia. On the menu at the Lotus Café, which is surrounded by a landscaped Japanese-style koi pond, the Sheraton Club Sandwich is offered in English, Mandarin, and Russian.

That day, the hotel was hosting a corporate retreat for the Chinese subsidiary of Syngenta, a multinational based in Switzerland which sells genetically modified seeds. The hundred or so employees spent the afternoon playing games on the beach, including the confidence-building drills in which one person falls back into the arms of a colleague. “Trust your partner, trust your partner,” the master of ceremonies shouted. Having fun on the beach, they barely looked up when a Chinese Type 054 frigate sailed casually across the bay, in plain view of the tourists. Yalong Bay, it turns out, has a double life. The brand-name hotels occupy only one half of the beach; at the other end lies China’s newest and most sophisticated naval base.

Yalong Bay is where the two sides of China’s rise now intersect, its deeply connected economy and its deep-seated instinct to challenge America—globalization China and great-power China vying for a spot on the beach. Celebrating their success in the China market, the Syngenta employees at the Sheraton all wore T-shirts emblazoned with the English-language slogan for their event: “Step Up Together.” Yet right next door to their party was one of the most striking symbols of China’s great-power ambitions. Ideally situated for quick access to the busy sea-lanes of the South China Sea, the base in Hainan is one of the principal platforms for an old-fashioned form of projecting national power, a navy that can operate well beyond a country’s coastal waters. For the last couple of decades, such power politics seemed to have been made irrelevant by the frictionless, flat world of globalization. Yet Yalong Bay demonstrates a different reality. It is one of the launchpads for what will
be one of the central geopolitical tussles of the twenty-first century—the new era of military competition in the Pacific between China and the U.S.

——

The Asia-Pacific region is now the most dynamic economy in the world and accounts for around half of all output, an intricate network that takes software and design from California, tiny microchips from Japan, and sophisticated screen technology from South Korea, and assembles them into iPads in a factory in southern China. Given that nearly 90 percent of intercontinental commerce travels by ship, Asia’s seas have become the principal arteries of the global economy. If there is a symbol that defines the era of globalization, it is the container ship. Traveling the long sea-lanes west from Asia toward Europe and east toward the U.S., the biggest ships now carry as many as seven thousand containers, stacked eight rows high. The enormous economies of scale that container ships offer have made it possible to manufacture socks and televisions in Asia and then sell them at low cost in Walmart or Primark. The ease and safety with which these hulking ships, the length of four football fields, travel safely across the world’s oceans is what makes the global economy tick. Freedom of navigation is the unwritten label on the modern consumer economy.

Two very different visions of Asia’s future are now in play. Since the defeat of Japan in 1945—and especially since the end of the Cold War—the United States Navy has treated the Pacific Ocean as almost a private lake. It has used that power to implement an international system in its own image, a rules-based order of free trade, freedom of navigation, and, when possible, democratic government. That Pax Americana was cemented in June 1971, when Henry Kissinger pulled Richard Nixon away from a state dinner for the president of Nicaragua and showed him a secret cable from Chinese Premier Zhou Enlai in which Beijing agreed to a face-to-face meeting between the leaders of the two countries.
“This is the most important communication that has come to an American president since the end of World War Two,” Kissinger told Nixon, with his customary mixture of grandiloquence and flattery. The four decades since Nixon met Mao Zedong have been the most stable and prosperous
in Asia’s modern history. Under the agreement, the U.S. endorsed China’s return to the family of nations, and China implicitly accepted American military dominance in Asia.