Learning from the West’s China engagement: Parabellum paradigm and constantly seeking asymmetric advantages

China’s strategy since its international rehabilitation in the 1970s has been a constant quest for asymmetric gains. They did this by pushing boundaries on trade, territory, technology – continually nudging towards new “status quo” each more in their favour; apologising and pretending to stop in the face of opposition; and resuming once things quieten. The strategy’s ideological underpinning is the parabellum paradigm: “If you want peace prepare for war.” Execution relies heavily on doublespeak - talk peace but practice realpolitik. Confucian commitments to peace are used to buy time and camouflage military build-ups that can be used opportunistically. An authoritarian regime that takes long-term policy decisions without the risk of public debate has helped.

Employing this strategy, China took advantage of US-European “engagement” and turned itself into an economic powerhouse. Western rapprochement with China formally started with Nixon’s 1972 visit. It took wings with China’s application to join GATT in 1986. This was the era of Deng’s “hide your strength, bide your time” liberalisation – promising the moon to attract investment and offshored manufacturing. The trickle of Western factories became a flood after China joined WTO in 2001. China promised market access, an end to currency manipulation, labour reforms, IP protection etc. The West was lured by the dream of accessing China’s growing domestic market, naively assumed that China would counterbalance Russia, and hoped global trade would get a world-benefitting fillip.

The reality was different, with largely asymmetric results favouring China over the West. Trade between China and the US surged nearly five times between 2001 and 2021.  Poverty levels in China reduced dramatically. China became the world’s factory and the fulcrum of global supply chains.  The West gained initially – cheaper manufacturing improved profits and consumers saw price reductions. The “China shock” came with a lag – US is estimated to have lost 2 million+ jobs to China. China continued to low-ball costs, especially wages, giving their products a false and unfair advantage.

Renminbi remained a case study in currency manipulation. Over time, Western firms realised that any IP transfers to China – voluntarily or by diktat, were going to be copied. What earlier seemed idiosyncratic, almost eccentric rulemaking turned into government control increasing in correlation with economic success.

Western “engagement” gave China aircover – guaranteeing it peace, and ease of access to markets and technology – perfect to execute the parabellum strategy. China used “engagement” to create a pipeline to the West – sucking in technology and capital while pushing out cheap exports supported by artificially deflated costs and currency manipulation.  China created almost exclusively surplus bilateral trade relationships. Simultaneously, China gained extraordinary heft in multilateral organisations. WHO’s “no problem” initial prognosis on COVID telegraphed Chinese mal influence.

Then China outgrew Deng’s prudence and revealed its true self. They flagrantly violated subsidy norms in grabbing export markets, imposed technology transfers and forced “shotgun” JVs. Then the trade surplus was used to project economic power – OBOR/BRI, tied loans for infrastructure in LDC. Simultaneously, the PLA (also a major business owner) was modernised. Between 2014 and 2018, China launched more naval ships than Germany, India, Spain and the UK combined.  

Claims on land territory and hitherto international waters were made and sought to be enforced through aggressive actions. Asian nations like Vietnam and Philippines were almost bullied while the Western forces had to face physical brinkmanship. Instead of finding stability, the West (US, Japan, NATO) had to raise military spending substantially to counter China’s international threat.

The combination of cheap debt and conciliatory statements meant countries did not react to China’s initial switch to aggressive territorial boundaries, nor to their acquisitive approach towards infrastructure assets of other countries. Eventually, China’s domineering raised hackles and led to protests in multiple countries - even Pakistan. Countries facing China’s territorial ambitions started to react and coordinate with each other. The QUAD is an example. Just as China’s strength projection hit its first obstacles, China started facing domestic challenges. Wuhan virus, shambolic COVID policies and a relatively ineffective vaccine hit them hard. The credit bubble, housing crisis and general diversification of China risk by investors and companies made it a perfect storm for Xi’s China. Xi Jinping (and the China government) need to re-establish their sense of power and credibility domestically, through external actions.

India’s response to Chinese aggression needs to consider the duality of their policy and avoid repeating the West’s mistakes.

• Recognise that China is an Antagonist. They are fair only when they are sure of winning.
• Acknowledge that China is a multi-dimensional adversary.
• Map our areas of dependencies including communication and control networks, capital markets, chemical and commodity supplies, and potential of social disruption through social media manipulation.
• Then, urgently invest in creating local alternatives to these dependencies.

This needs to be followed up by specific trade policy and security measures.

• Use WTO and other mechanisms to block predatory exports from China.
• Within India, explore the potential of replacing Chinese goods – especially using our indigenous traditional manufacture – bamboo and timber work, handlooms etc.
• Work with major consumer nations – Europe, US, Japan, Indonesia to diversify global supply chains away from China.
• Create a security ring around the Malacca Straits with similar minded countries. Countries like Philippines, Vietnam etc. want to protect their territorial autonomy from Chinese claims.
• Support countries that have been financially damaged by Chinese debt e.g. Sri Lanka, and undercut Chinese influence.
• Complement preparedness with alertness for “feints”. Taiwan is often a distraction used by China to put pressure on countries to gain other concessions.
• Stand up and be counted as an Asian leader.

The West courted China with great hopes of economic and political benefits. China just took advantage. Our engagement with China must be based on an acknowledgement of China as an antagonist, and with preparation for the dichotomy between their stated philosophy and aggressive real intent.

The author is a former investment banker and an avid China watcher. Views expressed are personal.

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