Can America Win in a New Era of Competition with China?

An Excerpt from ‘The Contest of the Century’

Beijing was in a state of heightened anxiety and had been for weeks. Each day in the run-up to the National Day parade, the security measures seemed to get a little bit tighter. Our apartment building had a distant view of Jianguomen, which is the main east-west avenue that runs through the center of Beijing, traversing Tiananmen Square along the way, and which was to be the main parade route. During rehearsal the Sunday before, we were told not to go onto our balconies. “What happens if we do? Will we be shot?” a neighbor jokingly asked. The building manager replied in a deadpan manner, “Maybe; who knows?” All the pigeons in the city were locked up and kite flying was banned, presumably to prevent undesirable threats to the safety of airspace. On the day itself, the two blocks on either side of the route were closed off to passersby. The 2009 event was to be the sixtieth anniversary of the foundation of the People’s Republic of China, the first parade in a decade, and only the fifth time since the 1950s that such an event had been held. But, unlike in previous October 1 parades, no ordinary people were allowed to line the route and watch the festivities. The center of Beijing was hermetically sealed off from the city’s residents. For everyone but the invited crowd of VIPs and journalists, this was a television-only spectacle. Despite the country’s booming wealth, China’s rulers can often seem insecure, looking anxiously over their shoulders at the people they govern. In the weeks leading up to the parade, they had conducted a crackdown on human-rights lawyers, and three months later they ordered an eleven-year jail sentence for Liu Xiaobo, the democracy activist who would later win the Nobel Peace Prize. The heavy-handed security was fruit of this nervy mindset.

A few hours before the parade was to start, I watched a stream of maybe fifty, maybe one hundred buses pass by, all with a regulation thirty meters in between them. The first group stood out because of the bright clothes of the excited young people inside—this bus orange, that one green, another blue. The next group were filled with soldiers in dress uniform, some trying to catch a last-minute nap, their heads pressed against the glass. With precision timing, they were being ferried to their starting places for a three-hour-long spectacle which was at times intimidating, at times impressive, and at times folksy, but never anything but meticulous. Like the morning mist, which lifted to make way for bright sunshine, the pre-parade paranoia quickly evaporated. By midday, two hundred thousand soldiers and civilians had taken part in the procession, and I did not see a single foot put wrong. It was a display that mixed North Korean mass choreography with the sort of swagger the Soviets used to muster for May Day. The kids in colored T-shirts that I had seen on the buses filled the vast expanse of Tiananmen Square to hold up cards that formed gigantic phrases: “Obey the Party’s Command,” “Be Loyal to the Party,” and “Long Live the Motherland.” For an hour, the military showed off the very latest of its hardware, the product of two decades of double-digit spending increases. There were the J-10 fighter jets, China’s first homegrown jets, and a long line of DF-31A intercontinental ballistic missiles, which have the range to hit Los Angeles, and which the Xinhua News Agency later described as “remarkable symbols of China’s defense muscle.” A decade before, much of the weaponry on display had been bought from Russia; this time it was all developed at home.

Military parades have been a feature of Chinese statecraft for centuries. During the Qing dynasty (1644 to 1912), victory ceremonies were often organized for the emperor to demonstrate his authority, and under the Communists they have been revamped for television. Geremie Barmé, an Australian expert on Chinese culture, recalls that in 1984, which also happened to be the year of Deng Xiaoping’s eightieth birthday, a group of students from Peking University held up an impromptu sign during the parade that said “Hello Xiaoping.” As this was not in the script, the television cameras missed it. Once the event had finished, the spontaneous greeting was restaged and edited into the official broadcast. In 2009, the television highlight was the contingent from the Beijing Women’s Militia, who marched in precise fashion past the podium in red miniskirts and knee-high white boots, and who, Chinese media later revealed, were all models specially chosen for their uniform height. The main audience for the parades was the domestic one, which was to be both entertained and cowed by the organizational capacity of the Chinese state. But China is too big and too important for such an event to go unnoticed overseas. China’s leaders knew that images of its bristling military display would be beamed around the planet and seemed untroubled if the outside world was also a little intimidated. “It represents the realization of the great revival of the Chinese nation as a result of tireless struggle,” as the army described the event.

Before the military parade reached Tiananmen Square, the soldiers stopped in a long column along the main avenue to be reviewed by then President Hu Jintao. He was standing in the back of a Red Flag, China’s homegrown limousine, his head and upper body visible through the sunroof as it drove past the troops. Hu, a gray bureaucrat skilled at the inner workings of the party, went out of his way to cut a dour public profile, an almost deliberate anti–cult of personality. Dressed in a Mao tunic buttoned to the top, and with his dyed black hair immaculately coiffed, he seemed at first to have a slightly comic air, and I chuckled when a colleague quipped about his resembling an Austin Powers villain. Yet, as he boomed into the microphone in front of him “Tongzhimen hao” (“Greetings, comrades”) and “Tongzhimen xinku le” (“Thanks for all the suffering, comrades”), his voice, echoing all around the vast square, was a little chilling. Stern-faced, he returned to the podium at the gate of the Forbidden City, right above the giant oil portrait of Mao Zedong, and stood on the same spot where sixty years earlier Mao had declared that the “Chinese people have stood up.” Flanked on both sides by the other eight members of the Communist Party’s Standing Committee, the body that really runs the country, all dressed in dark business suits with red ties, Hu addressed the crowd. “Today a socialist China, geared toward modernization, the world, and the future, stands rock-firm in the East,” he declared. It was his biggest applause line.

Just over two decades before, the same square had been the scene of bloodshed. In the streets surrounding Tiananmen, Chinese soldiers massacred hundreds—maybe thousands—of Beijing residents as they tried to clear the student-led protests. Realizing their legitimacy had been called into question, Chinese leaders would sit somewhat meekly for years afterward as foreigners lectured them on the need to change their political system. Bill Clinton once told his counterpart, Jiang Zemin, that the Chinese Communist Party was “on the wrong side of history.” The scars from those events contributed to a desire among China’s leaders to maintain a low profile overseas and to focus on development at home. Shortly after the massacre, Deng Xiaoping devised his famous slogan to define Chinese foreign policy, advising his colleagues to taoguang yanhui—literally, “hide the brightness and nourish obscurity.” Deng knew that the resurgence of China’s economy would stir anxieties in the U.S. and across Asia, where many festering rivalries remain—even more so after the 1989 display of authoritarian muscle in Tiananmen. Deng realized that only by emphasizing humility and a willingness to cooperate could China develop its economy without provoking a regional and international backlash. For two decades, China looked inward and focused on rebuilding.

Yet, sitting under the baking sun in Tiananmen Square that morning, I felt Hu Jintao was delivering a very different message—the words of a risen China, not a rising China. He was telling the country and the world not only that the Communist Party was still very much in charge, but that it was also pursuing a path that was moral and right. China, he suggested, was now an important nation with legitimate interests, and it would not be afraid to defend them. Nations do not change tack overnight, of course, but the parade brought to the surface powerful forces that had been building for some time. It represented a symbolic turning point in modern Chinese history, when it became hard to ignore the way the Deng Xiaoping formula of self-restraint was crumbling and the new era of geopolitical competition with the United States that was emerging. The socialist rock in the East wanted to escape from the shadow of the West.

This is a book about the new age of rivalry. It is about why China now wants to start exerting influence around the world and about the growing competition with the U.S. that will be the single most important factor in world politics over the coming decades. If globalization has been the driving force over the last few decades—in fact, since China embarked on its economic reforms in the late 1970s, after the death of Mao—then there is now a powerful force pulling in the opposite direction, an old-fashioned struggle for influence and power between China and the U.S., the two most important nations in the world.

“The Contest of the Century” revolves around three central points.

The first is that China has started to make the crucial shift from a government that accepts the existing rules to one that seeks to shape the world according to its own national interests, from rule taker to rule maker. Beijing is starting to channel its inner great power. The book provides a portrait of the new Chinese mentality, the energies, ambitions, and tensions that are pushing China in this direction. Much of the discussion of modern China focuses on the nature of the Communist Party and its hold on power, and, indeed, it is impossible to detach ideology from the way China relates to the rest of the world. But China is also responding forcefully to the same sort of instincts that have animated new great powers in the past, with particularly strong echoes from both the U.S. and late-nineteenth-century Germany. “History does not repeat itself, but it does rhyme,” as Mark Twain is often quoted as saying—even though it is not clear that he ever did.

Second, to pursue those goals, China is inevitably finding itself pulled into a geopolitical competition with the U.S., the country in whose image much of the global order is fashioned. China and the U.S. are starting to contest the high ground of international politics, from control of the oceans in Asia to the currency that is used in international business. Forget their bland rhetoric: China’s leaders think very much in geopolitical terms and would like to gradually erode the bases of American power. Almost every important global issue will find itself colored by this rivalry. Yet it will not be the win-at-all-costs ideological struggle of the Cold War. Instead, this will be an older, more fluid form of rivalry that is based on balance of power and building coalitions of support.

Finally, I will argue that the U.S. is in a strong position to deflect this new Chinese challenge to its position in the world. Whether they have come to praise or to warn about China’s rise, most authors on China subscribe to an almost linear transfer of wealth and influence from West to East, from a U.S. in decline to an irrepressible China. There is an air of inevitability in the way China is presented. Yet the roots of American power are deeper than they seem and hard to overturn. If the U.S. can clean its own financial house and avoid the temptations of either confrontation or isolation, it will still hold many of the best cards in the twenty-first century.

“Great power” is a phrase with an old-fashioned, dusty feel to it, something from the history textbooks to do with the Schleswig-Holstein Question or the assassination of Archduke Franz Ferdinand. The age of the great power seemed to have passed with the Cold War and America’s unipolar dominance that followed the fall of the Berlin Wall. Yet the rise of China strikes many notes from a very different era. “No nation has ever experienced such an increase in its power without seeking to translate it into global influence,” Henry Kissinger once wrote about the U.S. in the late nineteenth century. Today’s China is animated by the same energies that stirred in the U.S. from the 1890s, when it announced itself to the world. At home, new great powers are possessed by an economic dynamism and a zeal for grand engineering, by the construction of modern cities and the laying of vast railway networks across continents. Before long, that energy takes them overseas, where their companies develop trading posts and factories across the globe. They feel the need to use their new economic power to strengthen their own security, to fend off potential rivals, and to protect their overseas interests—a mixture of pride and fear that leads them to build grand navies. As their standing grows, they try to mold the political, military, and economic rules that govern the international system. Rising wealth creates rising expectations among a new middle class that wants its rulers to stand up for their country. The material benefits of a growing economy are never enough for aspiring great powers—they also want respect, recognition, and influence. Power changes countries, just as it changes people.

When America started staking its claim in the world in the 1890s, it was propelled in part by a growing centralization of power in the presidency. The horrors of the Civil War had given way to a fragmented political environment in the 1870s and 1880s, with neither the executive nor Congress able to establish control of foreign policy. America’s international role only started to be transformed when the White House began to exert more decisive influence in the 1890s. In China, some- thing close to the opposite has happened. The last decade has seen what might be described as a fracturing of power in China in ways that have begun to have a decisive influence over the country’s foreign policy. China’s leaders have not abandoned Deng Xiaoping’s advice to keep a low profile—on the contrary, they regularly insist that it remains their guiding principle. Instead, the Deng consensus is being gradually overwhelmed by the reality of modern-day China and its society. Deng’s cautious strategy is slowly fraying. Fragmentation of power is not the same as political liberalization, of course, but, rather, a dispersal of influence within the elite. It means that China’s senior leaders do not enjoy the almost untrammeled authority that Deng once enjoyed. They face powerful vested interests within the party-state, and an officer class that has its own hawkish take on global affairs. They also have to keep an anxious eye on the nationalist views of a rising middle class. On airport bookshelves in China these days, alongside the Jack Welch and Bill Gates biographies, you can now find titles such as Xue Yong’s How to Be a Great Power, a sort of Cliff Notes for modern geopolitics. All these voices are pushing China to be more ambitious overseas. China remains resolutely authoritarian, but these days, it also has a lot more politics.

To think about China as a great power might seem obvious to readers who have watched the swagger and military buildup of recent years, but it goes against the two most dominant interpretations of what really drives modern China.

The first is what one might call the Davos view, after the home of the World Economic Forum, the contention that China’s leaders are so obsessed with economic development at home that they have little time for or real interest in getting too involved in the affairs of the world. Even if they did want to push harder against the U.S., so the argument goes, they would soon be confronted with the reality of the enormous economic interdependence between the two countries. It is easy to see why such a view would take hold. Achieving high rates of growth has been the singular achievement of China’s Communist leaders over the last two decades and their principal justification for maintaining an iron grip on power. And for Davos optimists, globalization has transformed international politics, creating a web of economic connections and dependencies that prevent any country from rocking the boat. Geopolitics, with its emphasis on competition and struggle between nations, has been rendered unnecessary by the multinational global economy. In China, there is a cottage industry of scribes developing slogans to impress the rest of the world with how unthreatening its rise really is—from the “Shanghai smile” and “win-win” economic cooperation to “peaceful development.” (“Peaceful rise” was taken up at one stage, but then dropped when it was deemed to be too threatening.) In The Post-American World, which is in some ways the most influential international-relations book of recent years in the West, Fareed Zakaria writes that the Chinese are too pragmatic to let the vanities of power politics damage their economic interests. “The veneration of an abstract idea is somewhat alien to China’s practical mind-set,” he writes.

Yet, when even the most materialistic countries arrive at a certain scale and economic reach, they feel they have no choice but to try and influence events beyond their shores. China’s epic urbanization push is being fueled by goods from the four corners of the earth—by oil from Saudi Arabia, by coal from Indonesia, by iron ore from Brazil, and by copper from the Congo. For the first time in its millennial history, China’s economic interests are genuinely global, and it needs a foreign policy to match them. Deng Xiaoping’s “hiding the brightness” is no longer sufficient. To keep its economy humming, China feels it needs to start molding the world it is operating in. China’s economy relies on the continued safety of seaborne trade—something which has been guaranteed since the end of the Second World War by the navy of the United States, the country which the Chinese elite mistrusts the most (with the possible exception of Japan). Like other great powers before it, China is building a navy to take to the high seas because it does not want to outsource the security of its economic lifelines to someone else. The problem-solving China so heralded at Davos is being replaced by something with much harder edges. In short, geopolitics is back.

The second brand of conventional wisdom holds that the regime in Beijing is too insecure about its hold on power at home to think seriously about challenging the U.S. The brittleness is everywhere to be seen, from the heavy-handed security at the 2009 National Day parade to the periodic arrests of dissidents to the opacity of the political process. One of the most commonly cited factoids about modern China is that Beijing actually spends more money on internal security than it does on its defense budget, even though military spending has been rising sharply. But what this explanation misses is that domestic insecurity is feeding, not inhibiting, the desire to stand tall overseas. In one way or another, the Chinese Communist Party has been suffering a legitimacy crisis since it abandoned Marx and embraced the market in the late 1970s, and that crisis has been more acute since the Tiananmen Square Massacre in 1989. The party has tried to fill this gap in all sorts of ways. Economic growth and a reputation for competent governance have been the main props. But China’s leaders have also buttressed their legitimacy with an appeal to a nationalism that is tinged with a sense of victimhood. Brittle politics at home are stimulating a more assertive voice abroad.

In the end, thinking of China as an aspiring great power is the best way to demystify the country, to resist the temptation to either demonize or exoticize. China is neither an anti-democratic hegemon launching a new Cold War, as its more conservative critics suggest, nor the postmodern, Confucian meritocracy that some supporters imagine. China is, instead, a state which is behaving in many of the same ways that other states have behaved when they started to become very powerful.

It is an indication of the influence of Deng Xiaoping’s taoguang yanhui formula that it has simultaneously been attacked by hard-liners at home and inspired fear abroad. The advice was kept secret at first, and to this day, there are differing accounts of the full text that he wrote. In the 1990s, the phrase was heavily criticized by Chinese leftists who thought it a sop to the U.S. Yet for many foreign audiences, it had a different feel. The official translation in China is “hide the brightness and nourish obscurity”; however, in the U.S., the same words have often been translated as “bide one’s time,” a phrase that contains a certain menace about future intentions. For Deng, the ambiguity was a way of keeping different groups happy. He always knew that a powerful China would start competing for power and influence with the U.S. He just wanted to put off the rivalry for as long as possible.

Such self-restraint has become harder to sell since 2008. A year before Hu Jintao stood up to speak in Tiananmen at the parade, Lehman Brothers had collapsed. The psychological fallout from the global financial crisis was particularly important in China, where predictions about inevitable American decline have taken deep root. Within the Chinese elite, there has been a long-standing argument about how China should behave toward the U.S. when China became a powerful nation: the doves said that China would be best served by playing along with the U.S.-led international system, while the hawks said China would need to stand up to the U.S. Yet it was a debate held in suspended animation. Everyone knew that Beijing would have to answer this question one day, but the priority for the time being was to focus on the building up of what Chinese officials call “Comprehensive National Power.” Just as 9/11 empowered American neoconservatives, the financial crisis ended the shadow boxing in Beijing and unleashed powerful demands within parts of the elite to begin taking on the U.S. The time to answer the question, the hawks demanded, was now.

To warn about growing competition, however, is not to predict conflict, especially in an era when nuclear deterrence provides a powerful brake on both nations. There are no Chinese plans for the sort of territorial expansion that scarred Europe in the late nineteenth century, or for a project of global domination. Instead, Beijing has more subtle, long-term instincts about gradually undermining the foundations of American power and influence, starting in Asia and moving outward. International-relations scholars like to ask whether new powers will rise within the existing order or try to overthrow it. But neither explanation captures China’s behavior. Instead, Beijing is beginning a process of gradually trying to mold the system in its own direction, to shape rather than tear down. Chinese leaders understand the limitations that globalization places on them, and the benefits that thirty years of trading with the U.S. have brought, but they are also far more skeptical and resentful about American influence than most in Washington realize. There is nothing surprising about what China is now doing. If anything, the surprise is that it did not start sooner.

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.