I

There is no such thing as ‘Asia’. The term refers to an arbitrarily drawn space on a map. Asia does not exist as a coherent cultural and historical area in the way that Europe or even Latin America exists.

This is one reason why China views its position and strategies in Asia only in a global context. That global context is conditioned, first and foremost, by the United States of America: China’s largest partner and competitor in just about every dimension. These partners differ, of course, in one crucial respect. The US is currently the dominant world power, presiding over a global architecture that encompasses all aspects of world affairs – political, economic, military and even cultural. The United States led the design and building of this global architecture after the Second World War and the Cold War, and the Asia-Pacific is a part of that architecture. China, by contrast, is a rapidly rising power, but it only became the powerhouse that it is today in the past generation.

China does not view the United States as an enemy, and the widespread notion that it does is one of the greatest of contemporary misperceptions. Nor, in my view, does the United States view China as an enemy. These two countries are enormously intertwined, though their relations do have obvious elements of tension. Such tensions are arguably inevitable at a time when the post-Cold War architecture appears to be breaking down. It is breaking down for two reasons. Firstly, the United States is in trouble. It is suffering from internal contradictions and the grave consequences of external overreach. The internal difficulties are perhaps the most serious America has faced in 100 years, and they are structural. The American political system has found itself captured by special interests; ideological partisanship has polarised the two-party governance structure; economic and social ills, such as the declining middle class, are not being addressed; much-needed reforms are stalled. And external overreach has led to failures and exhaustion.

The second source of breakdown is the so-called ‘rise of the rest’, of which China is the most prominent example. America’s share of the world’s GDP has significantly declined, and this trend will continue. When you are the dominant shareholder in a company – I’m a venture capitalist, so I use those terms – a shareholder who owns, let us say, 80% of its shares, you are likely to act in the best interests of the company. But when you own 30%, you are more likely to act in your own best interests. The United States, by this logic, will be a decreasingly reliable custodian of global order. At the same time, of course, the ‘rest’ are making claims that are often in conflict with the way that the global architecture was set up.

Some historical perspective is important here. China, the world’s second-largest economy, and soon to surpass the US as the largest, did not participate in the design and establishment of the current global architecture. It has benefited tremendously from that architecture, taking advantage of the system for its own development. Nonetheless, China’s interests were never taken into account in the design and construction of the current system – the backbone of which is the US-led alliance system – or its manifestation in the Asia-Pacific. Many have argued that China, being so powerful, now must act as a responsible stakeholder in the world system. Of course, that is correct in principle. But there is inherent tension, if not a contradiction, in asking a new power to act as a stakeholder in a system that it did not participate in designing or constructing, and whose interests were not taken into consideration when it was built.

The global architecture cannot be sustained in its current form. Yet the current architecture, like any complex institution, is inherently rigid, and cannot easily adapt to change. As a result, the US is very, very busy and very, very tired at the same time. Washington’s recent ‘pivot’ to Asia says it all. By definition, one can only pivot in one direction at a time. A couple of years ago there was a pivot to Asia, but then came the problems in Russia and Ukraine, and then again in the Middle East. Troubles like these make it very difficult for the ‘boss’ of the system to sustain a long-term strategy in any particular region.

II

China has its own long-term strategic objective: to reclaim a pre-eminent position in Asia. Given its history and current position, this aspiration is understandable and wholly justified. In order to do so, however, it must seek adjustments to the current global architecture in Asia, and this, of course, gives rise to tensions. Many say that China’s assertive moves in recent years – in East Asia and Southeast Asia – have hurt its position, as many of its neighbours have now moved closer to the US. I disagree with that assessment. One cannot reach for a bigger share of the pie, and at the same time expect everyone else to happily oblige. I certainly have never experienced that in the business world. In 25 years as a capitalist, I’ve never walked into a boardroom and said, ‘I think I deserve a higher percentage share in this company’, and had everyone clap and say, ‘Wonderful; take some more.’ It doesn’t happen. So tension is natural.

Whenever one tries to get a bigger share of the pie, the potential upside is the bigger share, while the potential downside is, of course, a total breakdown which destroys the pie itself. In this case, the pie-destroying breakdown would be military conflict. The very essence of strategy is to balance upsides and downsides, and to optimise one’s interests. On that basis, it seems to me that China has performed rather brilliantly in recent years. The objective is to realise adjustments to the status quo, in China’s favour, without triggering a war. In both the South China Sea against the Philippines, and the East China Sea vis-à-vis Japan, China has indeed achieved that object. In the East China Sea, with regard to the contested Senkaku/Diaoyu islands, the status quo was Japan’s denial that any dispute existed, and its near-complete administrative control there.

Now, China’s moves have made the dispute, and its own presence in that area, a reality, but without war. Also in the South China Sea, China’s presence near Huangyan Island (sometimes called Scarborough Shoal) has altered the status quo in its favour, again without war.

In this respect, China holds a significant strategic advantage over, say, Japan. China is an independent player, while Japan is not. Japan is part of the US-led global architecture, and is locked into its alliance system. For instance, Japan has worked very hard to improve relations with Russia; for several years, this was a strategic priority for Tokyo. Yet, once the Ukraine crisis arrived, this strategy collapsed, because Japan had to go along with the priorities of the Western alliance. China, on the contrary, has wide room for manoeuvre, even as Japan is boxed in.

At the strategic level, while Japan’s counterparty may be China, China’s counterparty is always the United States. Chinese anger towards Japan on historic grounds is genuine, but this is a moral disagreement, not a strategic conflict. Between China and the United States there is genuine strategic competition. The US is, of course, much more powerful than China in all respects, except when it comes to the sizes of their objectives. China’s objectives in Asia are modest, relative to its national capabilities – it is punching below its weight. America’s objectives in the world are enormous compared to its national capabilities and the internal problems it faces – it is punching above its weight. It is in this context that China will execute its strategies, and the longer-term result will be qualitative recalculations by China’s neighbours in the region as they adjust to China’s power.  

None of this means an emerging Cold War in Asia. The term Cold War refers to the struggle between America and the Soviet Union. Yet China today is totally different from the Soviet Union. China is deeply integrated into the world economy; in fact, it is the largest trading nation in the world, and in history. China’s engagement with the United States is extraordinary in its breadth, depth and scale. Future generations of Americans will depend on China’s stability and prosperity, and vice versa. In Asia, moreover, China is deeply engaged with all its neighbours, including Japan, at all levels. This does not mean there will be no tension, or unhappiness, as China gradually gains a bigger share of the pie. Are there risks? Of course there are, because there could be accidents and unpredictable events.

III

Some argue that the difficulties presented by China’s rise could be resolved if China would simply adhere to the so-called rule of law. For instance, Japanese Prime Minister Shinzo Abe made this argument the centrepiece of his 2014 address to the IISS Shangri-La Dialogue in Singapore, where various delegates also made repeated reference to UNCLOS (the United Nations Convention on the Law of the Sea). Indeed, the word was invoked so often I finally went back to Shanghai and read the thing, every last page of it. To any masochist, I highly recommend the experience. But I made an important discovery: UNCLOS does not address the issue at hand, which is a sovereignty dispute. In fact, when UNCLOS was set up, it specifically skirted the issue of historical titles. Otherwise, the law would never have come into existence. Questions of sovereignty are fundamentally political issues. That is why UNCLOS provides a specific opt-out for countries that do not want the law to become a circus, and China has taken that option.

Thus, there is no law that can prevent China from, for instance, establishing an Air Defence Identification Zone (ADIZ). Indeed, it is worth remembering that Japan has the largest ADIZ in Asia. China’s, by comparison, is very modest, particularly when taking into consideration the relative sizes of the Chinese and Japanese land masses. China’s declared ADIZ only stretches a few hundred miles from Shanghai and Beijing (its industrial and political centres), while Japan’s ADIZ, at its furthest point, stretches well over 1,000 miles from Japan’s political and industrial centres. Of course, no law prevents Japan from setting such boundaries as it chooses, and indeed, Japan’s ADIZ has been enlarged before, unilaterally, without any calls being placed to foreign capitals, except perhaps to Washington.

It is worth noting that China has a fundamentally different world view than the American outlook, which underlies the current global order. China’s outlook is one of plurality, not universality. The world is an arena in which nations and groups compete, cooperate with and counterbalance each other. Globalisation is not a project to drive all nations towards a preconceived and unified end, but a process through which this multifaceted dynamic takes place. The drive to build ‘New Silk Roads’ west through Central Asia to Europe, and south to Southeast Asia, along with the recently launched Asia Infrastructure Investment Bank are excellent examples of this different Chinese view of globalisation. There will necessarily be divergences with the established structures, but also many overlapping interests.

If we want to resolve these issues we need to be clear-headed. And we need to be patient. The global architecture is by definition rigid. It is difficult to make adjustments to it, and adjustments may be painful. We are in the process of a long and complex historical negotiation between China and America. But China’s strategies and America’s own interests, and their interdependence, will lead to the gradual emergence of a new and stable configuration.