On July 12, China lost the UNCLOS
decision regarding its territorial claims in the South China Sea. These were
categorically rejected, as could well have been anticipated years ago. For
example, China’s base at Fiery Cross Reef is 630 miles from Hainan Island and
nearly at the southern tip of Vietnam. In addition, China’s mooted base at
Scarborough Shoal is a mere 150 miles from Manila, while it is 530 miles from
China proper. That China would lose this ruling could be foreseen from a very
long distance.
Now China faces the question
of how to respond.
Beijing has indicated that it will continue with its island building program
and reject the UN ruling. Over time, this would provide China
will increased leverage to institute an air defense identification zone (ADIZ)
in the South China Sea. This implies that China would challenge—and by
extension, engage with force—any foreign military aircraft or vessel
encroaching on this space that fails to identify itself to Chinese authorities.
It also implies the material annexation of the South China Sea.
Nevertheless, with the UNCLOS
ruling, the United States and other major powers will not honor any China ADIZ
in the area. Thus, the declaration of an ADIZ in the South China Sea would be
tantamount to a decision to go to war with the United States, and possibly
other countries as well. The appeal of this option is rapidly fading, as India
and France have also committed to freedom of navigation exercises in the SCS.
Does China really want to take on the combined navies of the advanced nations?
It hardly seems plausible, and any decent analysis even two years ago would
have suggested China would eventually face such an unappetizing option.
China’s South China Sea
initiative was misbegotten from the start. China runs a trade surplus of nearly
half a trillion dollars with Japan, the EU and the United States, with the
United States alone running at a $360 billion annual pace. The U.S. trade
surplus by itself amounts to more than 3 percent of China’s GDP. Clearly,
starting a war with the United States would see the surplus collapse and throw
China into recession.
Further, like it or not, the
United States Navy effectively controls both the Strait of Hormuz in the
Persian Gulf and the Strait of Malacca near Singapore. Half of China’s daily
oil needs pass through these two choke points. In a war, these flows may be
subject to embargo, which would bring the Chinese economy to its knees in a
month, if historical precedent holds. All these realities were true two years
ago as well, and that they were not properly anticipated suggests not only poor
policy analysis by the Xi government, but its virtual absence.
So where does China go from
here? First, let us acknowledge a few important tenets. China is a
Great Power deserving respect. The Chinese people have achieved incredible
gains, and that deserves respect, too. China needs a promotion from the rank of
Ordinary Powers to Great Power, just as the Chinese leadership and people feel.
All of these must be acknowledged. The question is how to achieve them.
For China to back down now in
the South China Sea would represent a return to the Century of Humiliation.
True, the cause of this is China’s over-reach. The base at Fiery Cross, south
of Vietnam’s Ho Chi Minh City (Saigon), was never going to be accepted by the
international community, and China was poorly advised to even try. But China’s
humiliation is in no one’s interest, and that includes the United States. China
is going to be around for a long time, and an angry and frustrated China
represents a bad, long-term risk. Even if China loses now, it will try again in
ten or twenty years when conditions are more favorable, and meanwhile the
Chinese will develop a dislike of foreigners in general and Americans in
particular. No one benefits from such a scenario.
On the other hand, declaring
an ADIZ and going to war would be destructive to all involved, including China,
the United States, and much of the global economy. Humiliation would be far
better than outright war, and indeed is looking all the more probable.
Is that it, then? Will it be
simple humiliation, with a consortium of foreign powers forcing China to
capitulate? Is this an updated version of the United States’ Open Door Policy
of the late 1800s, which aimed to keep China open to foreign trading partners?
Has China once again started a cycle of serial humiliation?
It seems so. But there is a
better path, one which can deliver to China both the respect and hegemony it
desires.
At the core of the dispute
between the United States and China is the concept of hegemon. Foreign policy
can be complex, but the notion is easy enough to understand with a children’s
analogy. For China, “hegemon” means that it is now bigger than the other kids
in the neighborhood and can take over the playground. In essence, China and the
Chinese still think of themselves as an Ordinary Power—just a bigger Vietnam,
for example. As just a bigger version of its neighbors, China can leverage its
size to get what it wants. It is the first among equals. “We’re big now and we
deserve respect, and respect means it’s our playground and you can only play
here when we say so. Remember, we can beat you up.”
The United States, by
contrast, sees hegemon as “system operator.” In this view, the biggest kid on
the block is by definition the adult. The adult has both opportunities and
obligations, but these do not include beating up the little kids on the
playground and taking their candy. Therefore, the United States sees China in
the South China Sea as an irresponsible teenager, preying on weaker countries,
rather than living up to its systemic obligations.
The United
States is resisting Chinese aggression on this basis, and this is why—contrary
to the expectations of the Xi administration—Washington has not folded under
Beijing’s pressure in the South China Sea. For the United States, as the system
operator—or the world’s policeman, to use the more common phrase—its
credibility is at stake in the South China Sea. If it folds there, then United
States commitments to dozens of countries around the world come into question,
and this in turn invites aggression from disaffected powers like Russia. For
China, the issue is limited to the South China Sea. For the United States, it
is one theatre in a larger global context.
Thus, if China sees hegemony
as “the most powerful country without constraints,” and the United States sees
hegemony as “the guarantor of international property rights,” then war or
humiliation is the inevitable outcome.
On the other hand, if China behaves as a legitimate system operator, then
squeezing out the United States becomes an attainable goal. It would do so by
providing hegemonic services to the East Asian community better and cheaper
than the United States does. Such services include protecting and assisting in
the clarification of regional property rights, as well as the creation of
impartial, credible and competent institutions to foster the development of
shared resources. It may also imply backstopping the United States to ensure
that critical East Asian imports—for example, Saudi and Iranian oil—continues
to flow to the region, even if the United States fails to provide security
services in the Middle East.
China is well placed to play
this role. The country specializes in providing manufactures and services of
good quality much cheaper than do the western powers. Playing regional hegemon
would simply be an extension of existing commercial strategy to the diplomatic
sphere. And China has huge advantages, because an authoritarian regime with
ample financial resources can move more quickly and decisively than the
protracted and mushy process that characterizes democracy.
Furthermore, China is local in
East Asia. The United States is not. Consider that not many people know that
the United States actually has two border disputes with Canada. The only way
the United States cannot resolve these disputes is with force, even
though it could easily defeat Canada in a war. Were the United States to try,
Canada would immediately look for allies, and among these would be China. Thus,
the United States threat of force would bring China into regional North
American disputes. Trust in United States intentions around the world would
also be undermined. If the United States is willing to seize Canadian territory
by force, what might it do in the Middle East? Might the United States decide
to take over, say, Bahrain? The hegemon, in some cases, cannot even threaten
force even if it could easily win a fight.
China faces the same logic. If
the country threatens it neighbors, as it has, then the United States is sucked
into intra-Asian disputes and China’s wider intentions in places like South and
East Asia come into question. An aggressive China in the South China Sea paints
China as a general threat to the region.
However, if China is providing
the public service of policing in East Asia, then the United States will feel
comfortable leaving. The voting public in democracies traditionally dislikes
spending money on the military in remote parts of the world. They would rather
spend it on healthcare and pensions at home. If the United States public feels
the country can afford to spend less in Asia—because China is doing a better job
than the United States could—then the United States will withdraw. For China,
the challenge is not defeating the United States, it is allowing
the United States to leave. This is a process of displacement, not confrontation.
China allows the United States to withdraw by providing hegemonic services to
the region better and cheaper than the United States. It’s that simple.
History tells us that assuming
hegemony does not imply war. The United States displaced Great Britain as the
global hegemon sometime between the two world wars. Nevertheless, the United
States and Britain have been the closest of allies for now two hundred years.
Hegemony was passed without conflict, indeed, in some cases at the behest of
Britain as the declining power. That is China’s model for East Asia. China
becomes influential and respected not because it can beat up the kids on the
playground, but because the kids on the playground trust China implicitly to
protect personal and property rights and permit fair play. They turn to China
for leadership, protection, financial support and organizational guidance.
China could be proud of itself for providing these services. That is the true
path to hegemony.
I am aware that I am asking a
huge amount from China’s leadership and its people. I know many mainland
Chinese, even those here in the United States, and they find it hard to adjust
to the model I am proposing. Most Chinese still feel small, that they are
besieged and are struggling to get to a higher level. They still feel they are
competing with Vietnam and Japan. They are thus surprised when I tell them they
have already arrived—they have already won the game—they only need to play out
the cards they have been dealt to win the match. Doing good will mean doing
well, and China will rise to the top, not because it is a military power, but
because it is committed to solving problems and dealing fairly with its
neighbors.
One could
easily imagine a program for China to establish hegemonic services in East
Asia. Do this, and China could be running the show in as little as two years.
Be that as it may, China must choose. Will it face a humiliating setback in the
South China Sea? Will it go to war and risk unmitigated destruction? With the
decision to continue to militarize the region even after the UNCLOS decision,
we may be on the path to war. But it is not compulsory. China could change tack
and adopt a strategy that will bring prosperity and hegemony with integrity and
honor. There is a better strategy for China.
Steven Kopits is a President
of Princeton Energy Advisors. He consulted to government, state-owned
enterprises and private clients in post-socialist Eastern Europe from 1990 to
2005, and monitors developments in China for his firm’s clients. Mr. Kopits regularly
contributes commentary for CNBC and writes about oil market for the UAE’s National
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