Guo Liangping: Crises and Choices in China’s Foreign Relations

Guo Liangping is a senior research fellow at the Institute of East Asian Studies of the National University of Singapore. The article was originally published in Chinese by Lianhe Zaobao.

A republished version of the Chinese-language article can be found here.

The world today is rapidly shifting from an economic world to a political one. The two worlds operate in differing logics: In the economic world, competition is about who wins more, whereas in the political world, competition is about who loses more. The world is thereby shifting from a win-win situation to a zero-sum one. Due to the change in the logic of international relations, China appears to be more isolated internationally than ever before; what used to work for China is no longer effective.

Throughout history, a stable political structure underpinned regions and periods with relatively free trade, such as the Mongol Empire—which had opened up trade routes between Asia and Europe from the 1200s to the 1500s—and various parts of the British Empire in the 19th century. And in times without political stability, where there are bitter rivalries between regimes, political logic inevitably confines trade practices. The United States promoted a liberal international order around the world after World War II, and, upon the collapse of the Soviet Union in the Cold War, economic globalization was in full swing. China’s growth gained momentum as this economic world began to take shape.

At the time, China was insignificant economically. Politically, China was considered to be heading towards liberal democracy upon the collapse of the Soviet Union and the general drift of Eastern Europe to the West. Moreover, Deng—who led the reformist wing of the Communist Party—maintained that China’s political reform would determine the ultimate success or failure of the nation’s economic reform. Yet China’s political framework remained unchanged after forty years, and Deng’s successors are increasingly confident about the nation’s political structure after significant achievements acquired through economic reform. Economic success is thereby attributed mistakenly to the continuation of the old system rather than the system’s reform.

The Fragmentation of International Relations and The Formation of Blocs

The rise of China has infused—and by extension, threatened—the post-Cold War Western political order with a different political logic. Out of this political struggle between China and the West, a new political world has emerged to replace the economic world. The formation of alliances in the political world has fragmented the globalized world, with the Western liberal bloc excluding China, Russia, and other “political abnormalities” from the public goods it provides.

But the appeal of liberalism is diminishing. Indeed, liberalism had tied the developed world together after the Cold War. Yet without major reforms, Western democracies will soon be unable to manage current problems, losing, in the process, their ideological edge in the international arena. Countries that are dissatisfied with the West will also refuse to remain cooperative and are seeking another way out.

The rise of the Third World countries may alleviate China’s current isolation in the international arena, for China has been viewed by them more favorably. But there exist some limitations in developing such relations. While such relations may benefit China politically, they may also bring disadvantages economically (e.g., China’s recent debt relief for third-world nations).

Three Major Developments That Will Impact China’s National Fortune

Three developments hold the potential to significantly affect China’s national fortune: 1) relations with Russia, 2) Taiwan, and 3) complete decoupling from the West.

Putin’s war in Ukraine has completely changed Russia’s fate. Surely Russia will be unable to recover from the war in the next twenty or thirty years. Russia will be marginalized. It will depend solely on energy and raw materials. Its military exports will be surpassed by China and other countries. This fate has been predetermined by its backward semiconductor industry. The longer the war lasts, the more Russia will be eager to strengthen its quasi-alliance with China.

Pressure from the West may bind the fortunes of China and Russia together. An alliance between China and Russia is undoubtedly beneficial in various ways: The two nations’ economies are highly compatible with one another; both are at the center of the world’s industrial, trade, energy, and raw material supply chains; both are military and nuclear powers. However, in forming an alliance with Russia, China will remain—for a long time—a second-tier nation in terms of science, technology, and economic development.

China will face more provocations on the Taiwan issue, both internationally and domestically. If war is declared, China could be isolated by the West and neighboring countries. Russia’s current situation in the Russo-Ukrainian War is a precedent: The West has the experience and the organizational capacity to impose comprehensive sanctions on a country. Russia remains far less dependent on the outside world than China, and a poorly timed “armed unification” with Taiwan would bring about devastating sanctions with the potential to end China’s rejuvenation in its entirety.

The West’s desire to disengage China has grown unexpectedly fast, yet China appears to believe that globalization is irreversible. It is such confidence that has enabled China in the past to leave its economic destiny to the international division of labor. But China’s division of labor is concentrated in low- and mid-range industries—which may be substituted—while the West and other developed countries firmly occupy the high-end technologies and industries that cannot be easily replaced. Thus far, China appears to be unbothered by the decouple movements because the nation believes that its industrial chain ecology cannot be replicated, that its national mobilization model will sustain technological advances, that the U.S. depends on China’s inexpensive yet high-quality exports, and that the Western countries desire China’s huge consumer market.

China’s semiconductor industry has once held a meeting with top manufacturers, academics, and government officials to discuss the extent of the industry’s dependence on foreign countries, and the result was inconclusive. Indeed, in the span of forty years, China has become accustomed to interacting with the West, and the inextricable ties and benefits the nation has received have been buried deeply in its subconsciousness. China did not realize that its key technologies and other areas have been so heavily dependent on foreign entities until the West began to disengage.

China has failed to recognize that the economic world is being replaced by a political world. If the West becomes successful in building an industrial chain completely bypassing China, its capacity for innovation and development would far exceed that of China; the gap between China and the developed countries would likely widen over time. As such, the top priority for China is to retain as much as possible the link with the dominant Western nations.

China’s Choices

First, China should start a strategic retreat and encourage the United States to stay in the lead in order to rebuild national strength. China and Russia are obvious targets (of Western sanctions) but insist on playing the leading role on the international stage. Russia lacks even more self-awareness than China, going so far as to confront the entire West with an economy smaller than that of the Guangdong province.

A better national policy for China would be to shrink the external front across the board, to stop promoting the “China model” and the “China solution,” and to cease pursuing high-risk, low-return projects such as the Belt and Road Initiative. Foreign trade and economic relations ought to be mainly carried out by private enterprises, and the state ought not to engage in foreign political achievements projects.

Second, it is important to approach decoupling seriously rather than passively waiting for it. Each industry should submit a report estimating the likelihood and specific modalities of decoupling in their industry, the impact on their industry, and what countermeasures can be taken to stop, delay, or thwart decoupling. There needs to be a national committee to synthesize the reports from each industry and develop a comprehensive response strategy. China’s overarching aim should be not only to avoid decoupling but also to facilitate a shift from the political world to the economic world. In entering the political world, countries will inevitably face difficulties such as higher production costs and lower living standards; if China is no longer seen as an “existential threat,” there will be an incentive to push for free trade and globalization again. After all, the forces which drove globalization have not yet disappeared—they are merely suppressed by politics.

Third, China should strive to gain approval from other nations instead of emphasizing the “Chinese characteristics.” This will reduce the perception of China as a threat. The so-called “China threat” has been mainly based on emotion and logic reasoning. The negative impact of China’s rise on the interests of Western nations has yet to be substantial. In fact, developed countries have benefited greatly from China’s rise: There have been many economic gains, cheap Chinese goods have lowered the cost of living for the public, and the growing Chinese market demand represents one of the biggest engines in the world economy. China is also sharing the burden for international public goods, and third-world countries are especially benefiting. To gain acceptance into the international arena, China must learn to represent itself as an understanding and open-minded nation.

Perhaps the biggest difficulty China faces is the overblown confidence  of its people and the stubbornness at the top. Consider Putin: His decision to invade Ukraine was foolish by any measure. Russia has enough collective wisdom to make comprehensive and effective decisions about the problems that Putin wants to solve through war, but such wisdom has yet to be acknowledged by those at the top. As a result, Russia has blatantly undermined basic international norms, offended the public, and in the process caused its own isolation and predicament. Meanwhile, the “Great Leader” continues to insist that all strategic objectives—which he has never clearly articulated—must be and will be achieved.

For Putin, there is no turning back. This is the result of the personality cult, which has regrettably afflicted the Chinese people and the Chinese Communist Party. From a modern perspective, the cult of the leader is vulgar and should not be tolerated by the Chinese society after the Cultural Revolution. Yet still, people remain responsive to the personality cult, perhaps due to China’s imperial tradition and the lag in political reform.