China as a Peer of the United States: Implications of the Joint Statement of September 25, 2015

China is emerging as a peer and partner of the United States in international affairs. India’s response should be to work with China in the Asia Infrastructure Investment Bank and in China’s ‘Road and belt’ initiative to make the ‘Asian Century’ a reality as well as in the G20, which China will chair in 2016 (and India in 2018), to begin shaping the future global agenda, ‘global goods’ and institutions, including reform of the United Nations, while maintaining strategic autonomy to safeguard its maritime trade routes.

New partners in climate change

In the US-China Joint Statement on Climate Change, President Obama has met the criticism of the US Senate that unilateral emissions reductions should not give China a competitive advantage while President Xi has achieved for developing countries what the G77 collectively was finding difficult to attain.

On 25 September, Xi and Obama outlined their “Vision for the Paris Climate Conference”, (re) defining the principle of common but differentiated responsibilities as a system that provides flexibility to developing countries “in light of their capacities” and “that differentiation should be reflected in relevant elements of the agreement in an appropriate manner”.

They also agreed on joint support for a “global transition to a low carbon economy, renewed focus on adaptation “as a key component of the long-term response” to build resilience and reduce vulnerability and the “crucial role of major technological advancement in the transition”.

The Statement recognises that transparency provisions have to include both ‘action’ as well as ‘support’ provided to developing countries – a long standing demand of developing countries. Also, transparency provisions are expected to “provide flexibility to those developing countries that need it in light of their capacities”, emphasising differentiation.

The Joint Statement moves beyond the post-colonial North-South dichotomy and welcomes the provision of resources from countries “willing to do so;” it is no longer seen as a commitment based on notions of historical responsibility. Both countries will provide USD 3 billion each to help poor countries, with China announcing the establishment of a China South-South Climate Cooperation Fund. This puts pressure on all developed countries to enhance contributions towards the USD 100 billion to be provided by 2020. The need for bilateral investments to encourage low-carbon technologies and climate resilience, equating mitigation and adaptation (even though these terms are not mentioned) provides an opening to discuss the role of public finance in the transition.

By endorsing a global goal of “low-carbon transformation” within the 21st century – convergence on an overarching meta-global goal is a significant development which the Sustainable Development Goals (SDGs) were not able to achieve – the statement also serves to define the ‘Objective’ of the Convention; something which has eluded the multilateral process since 1992.

New forms of international co-operation

Xi used his address to the United Nations General Assembly to reiterate China’s call for a “new type of international relations based on win-win cooperation.” He added: “We should resolve disputes and difficulties through dialogue and consultation,” as “the law of the jungle leaves the weak at the mercy of the strong.”

Xi emphasised that China represents less powerful nations through its seat on the Security Council (“China’s vote at the U.N. will always belong to developing countries”) and projected China as a champion of the developing countries.

The trip was planned so there would be major funding announcements on each of the three days Xi was at the UN General Assembly in New York, as that is what concerns the G77 the most. He pledged establishment of an assistance fund for South-South cooperation to implement the SDGs with USD 2 billion dollars; increasing investment in LDCs to USD 12 billion by 2030; and the exemption of debt owed by LDCs, LLDCs, and SIDS on interest-free loans; a USD 10 million contribution to the UN women’s agency, a USD 1 billion ‘peace and development’ fund and USD 100 million in military aid for the African Union. He also co-hosted a women’s summit at the UN.

China already contributes more peacekeepers than other permanent members of the Security Council. Xi promised to send the first Chinese helicopter squad to join peacekeeping in Africa, train 2,000 peacekeepers from other countries in China over the next five years, and build a peacekeeping standby force of 8,000 troops. Xi’s largesse portrays China as a contributor to global growth and security amid international concerns about China’s economic stability and military ambitions.

Global rules for the new services and knowledge economy

Over time, Xi’s success in implementing sweeping market reforms aimed at changing China’s economic model from an investment and export-driven one to an innovative consumer-driven and service-oriented one may be the critical factor in shaping Beijing’s economic and foreign policies in the future, as the economic relationship with the US will remain key.

Cyber issues are now among larger concerns in the economic relationship, with bilateral trade totalling USD 590 billion in 2014 and China holding USD 1.2 trillion in US Treasury bonds. On cyber-security it was agreed that “neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” In addition, Xi and Obama agreed to create a cabinet-level mechanism and a hotline to address concerns. Both pledged to cooperate in creating a global code of conduct for cyber security. The Bilateral investment treaty Talks stalled as each side offered “negative lists” of items to be excluded and these lists can wall off industries considered strategic such as energy, aviation, telecommunications or access to state-owned industry procurement.

New co-operative multilateralism

The United States and China will remain the key global actors in developing a multilateral consensus on global issues as long as they successfully represent the concerns of the others. In an inter-connected world, the outcome will be a new model of co-operative multilateralism supplemented by bilateral understandings between national stakeholders that do not require the mediation of the United Nations Secretariat and prolonged negotiations over obscure texts.

The post-world war multilateralism involved agenda setting by the G7 balanced by the G77 laying out their interests, or positions, at the start of a multilateral negotiation. Subsequent rounds of negotiations were designed to narrow the differences with secretariat documents suggesting consensus language and calls to capitals. Last minute compromises and trade-offs are very much part of the process, leaving most developing countries unhappy. The result has been continuing tension and the need for a United Nations secretariat to help mediate between the groups, siding more with the funders in achieving their goals. This arrangement has, at least for climate change, now lost its relevance.

The 21st century, characterised by the majority of the middle class living in cities, a post-industrial knowledge economy and global trade dominated by services rather than goods, needs to respond effectively to global concerns through means for agenda-setting and securing a global consensus very different to those adopted for a fractured world emerging from colonialism and world war. With the two largest economies and most powerful countries, that cut across the political divide, emerging as peers and partners, agenda setting will require wider consultation in the G20, which China will chair next year. India, too, must shape the contours of the new multilateralism by working with China.

New military and strategic balance in Asia

The Dongfeng (East wind) 21D “carrier-killer” missile, which made a public appearance in a military parade on 3 September 2015, with a range of 1,550 km and a projected 10 times the speed of sound (faster than anything that could intercept it) after re-entering the atmosphere can manoeuvre on to a target, making it theoretically capable of landing a large warhead on or near a moving ship. Some analysts say such missiles reduce the threat from aircraft carriers — which form the basis of current US naval strategy — just what aircraft carriers themselves did to battleships with Japan’s 1941 attack on Pearl Harbour. While the potency of the DF-21D is debated in the defence community, these capabilities are changing the balance of power in Asia against the United States requiring it to strengthen its alliance system.

The geopolitical world order established by the United States after World War II is unravelling because of the geo-economic shift to Asia. China’s Asian Infrastructure Investment Bank has served to focus minds in Europe and East Asia. The new Bank will be a rival to the IMF and World Bank and the US risks losing its ability to shape international economic rules, and global influence that goes with it. The UK described the decision as an “irresistible opportunity” and brought accusations from Washington about London’s “constant accommodation” of China, reflecting the two world-views on the emerging global order.

For India, the lesson from the failed US attempt to obstruct the new bank is that, as Asia’s urbanisation will require more than USD 8 trillion to be spent on infrastructure in this decade, countries in the region will welcome all the support they can get. Rather than be suspicious of China’s motives and seek to prevent the ‘Belt and road’ initiative, it should deal with the strategic concerns by joining in the development projects, for example, by providing the software packages required in the management of the ports. A mutual recognition of special interests of each other in the South China Sea and the Indian Ocean should be a strategic objective, and will be a strategic win-win for both.

The ‘Asian Century’ provides an integrating theme to focus minds on shaping the economic integration of Asia, where two-thirds of future global growth is going to come from, and the alignment of the rail, road, sea routes and gas pipelines from Iran, for example, can position India as a node for South and Western Asia. Including a services component in the projects will add to their productivity and support cooperation between the Asian giants; trade is a win-win proposition.

Conclusion

The global trend is that countries are gaining in influence more because of the strength of their economy than the might of their military. India can either drift into the future remaining in its periphery or it can shape the future jointly with China to become one of the two engines of the Asian economy. China is likely to remain the world’s largest producer of goods and India has the potential to be the largest producer of services in the largest consumer market. According to McKinsey and Company, the services sector will be the real driver of growth in Asia as affluence will be concentrated in cities. The ability to design, finance, build and implement the big data-technology systems will be the defining comparative advantage in the future, and India and China can work together to make this happen sharing their respective expertise. The complex interdependencies will be a strong stabilising force.

According to Prime Minister Modi, China and India are “two bodies, one spirit” and President Xi has emphasised the “need to become global partners having strategic coordination”. The G20 meeting in 2016 provides the opportunity for the Asian giants to work together to define a global agenda, ‘global public goods’ and institutions to respond to the global middle class and the Asian Century with two centres of gravity, with India seeking to achieve this joint agenda when it chairs the G20 in 2018.

Mukul Sanwal was Director, United Nations, 1993-2008.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.