China Is a Dangerous Rival, and America Should Treat It Like One

Enough with the endless talks and handshakes. We need to untie the American economy from China.
By Derek Scissors and Daniel Blumenthal

The Trump administration has been clear about its view of China. 

A 2017 national security strategy document called China a “revisionist” power attempting to reorder international politics to suit its interests. 

It’s difficult to think otherwise given Beijing’s military buildup, its attempts to undermine American influence and power, its retaliations against American allies such as Canada, and its economic actions.
How to respond is more controversial. 

After years of unsuccessful talks and handshake deals with Beijing, the United States should change course and begin cutting its economic ties with China. 

Such a separation would stop intellectual property theft, cut off an important source of support to the People’s Liberation Army and hold companies that are involved in Chinese human rights abuses accountable.
This will be no easy task. 

Some industries will have problems finding new suppliers or buyers, and there are entrenched constituencies that support doing business with China. 

They argue that any pullback could threaten economic growth. 

But even if American exports to China fell by half, it would be the equivalent of less than one-half of 1 percent of gross domestic product. 

The cost of reducing Chinese imports is harder to assess, but there are multiple countries that can substitute for China-based production, none of them strategic rivals and trade predators.
The United States economy and its national security have been harmed by China’s rampant theft of intellectual property and the requirement that American companies that want to do business in the country hand over their technology. 

These actions threaten America’s comparative advantage in innovation and its military edge.
Even uncoerced foreign investment in technology can strengthen the Chinese military-industrial complex, especially since the Communist Party has moved, since Xi Jinping took office in 2012, to a defense industrial policy that translates in English to “civil-military fusion.” 

In practice, many Chinese and foreign “civilian” companies serve as de facto suppliers for the Chinese Army and its technological-industrial base. 

Residents and visitors are subject to constant visual surveillance, and a nascent “social credit program” in which disobedience to party dictates is reflected in credit scores, which could affect everything from home purchases to job opportunities. 

These forms of social control often use technology developed by Western companies.
The United States should make major adjustments to its economic relationship with China. Comprehensive tariffs, which harm American consumers and workers unnecessarily, are not the right reaction. 

But neither are admonishments to “just let the market work.”

Under Xi Jinping, China has moved to a defense industrial policy that translates in English to “civil-military fusion.”

The scale of China’s industrial-policy distortions, technology thievery and efforts to modernize its army are too significant for such superficial responses. 

The American government must intervene in the market when it comes to China, although that intervention should be limited to areas that are genuinely vital to national security, prosperity and democratic values.
For example, the United States government should impose sanctions on the Chinese beneficiaries of intellectual property theft and coercion, in cooperation with our allies. 

This was the legitimate target of the United States trade representative’s original inquiry in August 2017 under Section 301 of the Trade Act of 1974, but the policy steps chosen — tariffs — focus on the trade deficit instead of loss of intellectual property.
Rather than across-the-board tariffs, Chinese companies receiving stolen or coerced intellectual property should not be allowed to do business with firms in America or, with our allies’ cooperation, in Europe and Japan. 

The United States should also intervene to halt foreign investment in any technology that assists the Chinese Army or contributes to internal repression and limit the access to global markets of any Chinese company that is tied to human rights abuses and army modernization.
Taking these actions would require an enormous amount of intelligence collection by American security agencies as well as crucial information from American companies. 

The latter is difficult to obtain: Out of fear of Chinese retribution, the foreign business community will cooperate only if there is a clear, bipartisan and long-term commitment by the American government.
While the United States must act unilaterally if necessary, the cooperation of allies such as Japan, Germany and Britain would make these steps more effective. 

Such countries have their own interests in China. 

Imposing sanctions in the name of national security on the European Union and China, as the Trump administration has threatened, would unwisely give them common cause.
Previous efforts to assert America’s influence against China, such as the discarded Trans-Pacific Partnership, did not push back effectively on Chinese economic aggression. 

Working with allies to directly address China’s malfeasance would.
All this means putting China at the top of American international economic priorities and keeping it there for years, without overstating or overreacting to trade disputes with our allies.
The administration has demonstrated some good instincts on China, but it must not be distracted by the next round of Beijing’s false economic promises. 

Protecting innovation from Chinese attack makes the United States stronger. 

Hindering the Chinese security apparatus makes external aggression and internal repression more costly for Beijing.
China is our only major trade partner that is also a strategic rival, and we should treat it differently from friendly countries with whom we have disputes. 

If Washington wants the global free market to work, it must intervene to blunt Beijing’s belligerence.

U.S.-Led Infrastructure Aid to Counter China in Indo-Pacific

• Australia, Japan link with ally to fund ‘peace and prosperity’
• Pact enhances Trump’s evolving national security policies

By Jason Scott
Julie Bishop 

The U.S., Japan and Australia agreed to invest in infrastructure projects in the Indo-Pacific in a move seen as a counter to China’s rising influence in a region that stretches from the east coast of Africa, through Australia to Hawaii in the Pacific Ocean.
“This trilateral partnership is in recognition that more support is needed to enhance peace and prosperity in the Indo-Pacific region,” Australia Foreign Minister Julie Bishop said Tuesday in an emailed statement. 

The pact will mobilize investment in energy, transportation, tourism and technology infrastructure, according to the statement, which didn’t give any funding details.
The announcement comes after U.S. President Donald Trump’s National Security Strategy in December called for policies to answer rival powers’ infrastructure-building efforts. 

Chief among these is Chinese dictator Xi Jinping’s Belt and Road Initiative, a global plan to build or expand highways, railways, ports, pipelines and power plants that Morgan Stanley forecasts could grow as large as $1.3 trillion over the next decade.
U.S. infrastructure cooperation with Japan and Australia would dovetail with the Trump administration’s evolving national security policies, which have cast the U.S. as in “long-term, strategic competition” with China and Russia. 

Beijing’s BRI calls for half a trillion dollars in investment in infrastructure along trade routes to China, which is expected to overtake the U.S. as the world’s largest economy before 2030.
Before visiting China in November, Trump signed two deals with Japan, pledging cooperation on infrastructure projects in the region.
Secretary of State Michael Pompeo, speaking Monday before a trip to Asia amid an escalating trade war with China, said the U.S. believes in “strategic partnerships, not strategic dependency” -- a veiled criticism of Beijing’s efforts to woo countries with cheap financing for infrastructure projects.
“With American companies, citizens around the world know that what you see is what you get: honest contracts, honest terms and no need for off-the-books nonsense,” Pompeo said. 

Another advantage of the U.S. is that “we will help them keep their people free from coercion or great power domination,” he said.
Pompeo is likely to make announcements about the pact’s funding arrangements during his visit to Asia, which will include Malaysia, Singapore and Indonesia, according to Stephen Kirchner, director of trade and investment program at the U.S. Studies Centre at the University of Sydney.
“This is designed to provide mechanism that will allow more private-sector funding for the infrastructure projects that countries in this region need,” Kirchner said. 

That will mean it will operate in different ways to established funds such as the World Bank and Asian Development Bank, he said.
In February, Bishop said the three nations, along with India, had discussed opportunities to address “the enormous need for infrastructure” in the region, which encompasses some of the world’s poorest as well as fastest-growing economies.
India wasn’t mentioned in Tuesday’s announcement. 

Instead, the pact will be organized by the U.S.’s Overseas Private Investment Corp., the Japanese Bank for International Cooperation and Australia’s Department of Foreign Affairs and Trade.
“This partnership represents our commitment to an Indo-Pacific region that is free, open and prosperous,” the three nations said in a joint statement issued on Monday, according to Bishop. 

The trilateral partnership will be formalized “in due course,” Bishop said.

Strained Ties
Australia’s diplomatic relationship with China has been strained since December when Prime Minister Malcolm Turnbull said Chinese meddling in the nation’s government and media were a catalyst for new anti-foreign interference laws, which passed parliament last month.
China lodged a formal protest with Australia in January after Turnbull’s minister for international development, Concetta Fierravanti-Wells, said the Belt and Road plan risked building “useless buildings” and “roads to nowhere.”
Australian Trade Minister Steve Ciobo denied the new pact was designed to counter China and said he wasn’t expecting a backlash from Beijing.
“Why would there be any?” Ciobo said in a Sky News interview on Tuesday. 

“The fact is that we demonstrate consistently that Australia is very focused on making sure we can help the least-developed economies in our region.”

Chinese Subversion

China’s fingerprints are everywhere
By David Ignatius

A little-noticed passage in the Trump administration’s National Security Strategy released last month previewed a new push to combat Chinese influence operations that affect American universities, think tanks, movie studios and news organizations.
The investigations by Congress and the FBI into Russian meddling in the 2016 presidential campaign won’t be affected by the added focus on China, officials say. 

Instead, the aim is to highlight Chinese activities that often get a free pass but have a toxic long-term effect because of China’s growing wealth and power.
A National Security Council interagency group is coordinating the administration’s study of Chinese activities that are “outside traditional espionage, in the gray area of covert influence operations,” a senior administration official said. 

 The rationale, noted in the 55-page strategy document, is that “America’s competitors weaponize information to attack the values and institutions that underpin free societies, while shielding themselves from outside information.”
In targeting Chinese operations, the administration is walking a delicate line between helping American academics, think-tank experts and journalists resist pressure and fomenting mass public anxiety about Beijing’s activities. 

Officials say they want to help American institutions push back against intimidation from a Chinese Communist Party that is rich, self-confident and seductive in a way that Russia has never been.
The administration official said in an interview Tuesday that the target “is not Chinese soft power — the legitimate exchange of people and ideas, which is something we welcome. What we’re talking about are coercive and covert activities designed to influence elections, officials, policies, company decisions and public opinion.”
Kurt Campbell, who oversaw Asia policy during the Obama administration and now runs an Asia consulting group, offered a measured endorsement: “The NSC-led inquiry about Chinese influence operations, if conducted dispassionately, could be useful. We focus mostly on Russian influence operations. But the Chinese have a much more subtle and complex agenda here.”
A catalyst for the Trump administration’s probe was an investigation in Australia, which revealed what that country’s security chief called “unprecedented” Chinese meddling that could damage Australia’s sovereignty. 

Prime Minister Malcolm Turnbull proposed new controls in December.
The administration official offered examples of how American institutions can be pressured by China:
● Universities host more than 350,000 Chinese, who make up nearly a third of all foreign students here. 

Beijing encourages students to join local branches of the Chinese Students and Scholars Association. 

Sometimes students get squeezed. 

The senior official cites the case of a Chinese student from a dissident family who was warned by a friend not to share personal details — because the friend would report them to Chinese intelligence.
Students and university officials who resist Beijing can pay a price. 

A Chinese graduating senior at the University of Maryland last year was shamed by social media into apologizing for a comment praising free speech. 

At the University of California at San Diego, an invitation to the Dalai Lama brought a protest from the local students’ association and warnings that UCSD might not receive more Chinese students and that its graduates’ degrees might not be recognized back home.
● Think tanks are eager to study China, but often the money to support research comes from business executives with close relations with Beijing. 

That can lead to pro-China bias. 

In conversations with think-tank leaders, the senior official said, he has stressed “the need for think tanks to cast a brighter light in this area. We think sunlight is the best disinfectant.”
● Hollywood studios face an especially delicate problem, because the Chinese box office is so important to their bottom line. 

Ticket sales in China rose from $1.5 billion in 2010 to $8.6 billion last year, second only to America’s. 

Inevitably, U.S. studios fear offending Chinese official "sensibilities".
● News organizations face pressure, too. 

China restricts visas for journalists or publications it sees as too "aggressive". 

After Bloomberg News published revelations in 2012 about the family wealth of Chinese political leaders, Beijing temporarily blocked sales of Bloomberg’s financial data terminals in China, a potentially crippling move.
China’s glittering modern facade often convinces outsiders that it’s a country just like those in the West. 

Not so, says Peter Mattis, a former CIA analyst who now studies Chinese influence activities for the Jamestown Foundation. 

When American thought leaders interact with Chinese representatives, it’s not a free-flowing “conduit,” he says, but a controlled circuit.
America has never faced a rival quite like China, which presents such a compelling, well-financed challenge to democratic values. 

America certainly doesn’t want a new “Red Scare,” but maybe a wake-up call.