Month: January 2021

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VULNERABILITIES IN CHINA’S FINANCES; RISKS FOR U.S.

The U.S.-China Economic and Security Review Commission has issued its annual report to Congress. The New York Analysis of Policy and Government will periodically present summaries of their work.

In 2020, the Chinese government leaned on state control to contain the  economic fallout of the COVID-19 pandemic, instructing banks to lend  to companies hard hit by the virus and deploying the country’s financial  system to absorb the pandemic’s shocks. While Beijing’s response has  enabled a rapid recovery in China’s economy, it has done so by fortifying the role of the state in managing economic activity and promoting policies.

The Chinese government is beginning to experiment with breaking  this implicit guarantee and to defuse risks in China’s financial system  as regulators embark on a cleanup of the banking sector and assess  systemic problems caused by a decade of rapidly accumulated debt  (see Figure 6). Confronting the scale of these problems, the Chinese  government increasingly views foreign capital as part of the solution.  Beijing’s financial opening in recent years thus reflects a calculated  strategy to secure foreign investment inflows and use them to shore up  the domestic economy and strengthen its companies. As this opening  continues, exposure to unique risks in China’s financial system rises  for foreign investors, and their financial wellbeing becomes increasingly  staked on Beijing’s management of the Chinese economy. China’s  financial opening is also deepening U.S.-China financial integration just  as the U.S. government takes more concerted steps to confront China’s  unfair economic policies and threats to U.S. interests. Of particular  concern is the rising inclusion of Chinese securities in global investment  indices. These inclusions are funneling hundreds of billions of U.S.  investment dollars toward a financial system that lacks transparency,  adequate pricing of risks, and regulatory oversight (see Figure 7).  They are also financing companies whose operations are otherwise  antithetical to U.S. national security and foreign policy objectives.

There is every indication that China’s quest for foreign capital will  continue. Local governments shoulder crushing debt levels, banks  remain undercapitalized, and increased public expenditure on caring for  an aging population will erode national savings. U.S. portfolio investment  inflows to China are also poised to grow significantly, especially if  China recovers from the pandemic ahead of other economies, making  Chinese financial markets more attractive. As these trends converge  and U.S. exposure to risks in China’s financial system rises, doubts  about whether deepening U.S.-China financial integration is desirable  are coming into sharper relief. 

Key Findings 

China’s formal financial system is dominated by state-owned banks,  whose position has been strengthened in the wake of the COVID-19  pandemic in 2020 (see Figure 8). These banks favor state-owned  enterprises (SOEs) and privileged companies, leaving other Chinese  companies starved for capital. Between 2008 and 2016, a large and  unwieldy shadow banking sector emerged to fill this gap, leading to  a proliferation of risky financial products and rising leverage across  China’s financial sector. 

▶ In 2016, Beijing launched a financial de-risking campaign to rein  in shadow banking activity and clean up the financial sector. This campaign choked off small private companies’ access to financing.  The COVID-19 pandemic has further deteriorated the financial health  of these companies, forcing the government to ease its regulatory  tightening and prioritize economic stability over financial de-risking.  With such vulnerabilities remaining unaddressed, investors in China’s  capital markets are increasingly exposed to structural problems in  China’s financial system.  

▶ As Beijing strategically opens its financial sector to secure foreign  capital and global investment indices shift asset allocations toward  Chinese securities, U.S. investors’ exposure to the unique and  significant risks accumulated in China’s capital markets rises (see  Figure 9). These risks center around the opacity of China’s financial  system and Beijing’s interference in market activity to advance its  political objectives. 

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▶ Increased financial exposure to China threatens to undermine U.S.  efforts to defend against China’s unfair economic practices and  protect U.S. policy interests. Several Chinese companies included in  global investment indices are subject to U.S. export controls but not  investment restrictions. This mismatch enables problematic Chinese  companies to continue raising U.S. capital and reduces the strength  with which the United States can defend against companies that  threaten national security. 

▶ While China’s leadership speaks of developing more dynamic capital  markets, liberalizing interest rates, and imposing market discipline  on the banking sector, these ambitions are tempered by a low  tolerance for market instability and a strong bias in favor of state 

owned companies to maintain economic growth and safeguard  employment. 

▶ After years of unbridled lending, China’s financial system is facing  

▶ Beijing continues to deny U.S. audit regulators full visibility into  the financials of U.S.-listed Chinese companies in line with U.S.  accounting standards. These evasions from effective regulation and  oversight, together with U.S.-listed Chinese companies’ complex  ownership structures, deprive U.S. investors of both full transparency  and the opportunity for legal redress in cases of accounting fraud,  eroding the integrity of U.S. capital markets. 

▶ The COVID-19 pandemic has exacerbated key risks in China’s  already strained financial system. Although a full accounting  of economic damage is still underway, China’s first economic  contraction in four decades will make it more difficult to tackle  the country’s debt burden, resolve nonperforming loans, and  efficiently allocate capital. 

▶ Beijing’s imposition of the national security law in Hong Kong  has accelerated the territory’s assimilation into China’s national  governance system, which could erode its status as a global financial  hub. As the Chinese government calibrates financial opening, it may  lean more on Hong Kong to raise foreign capital and serve Chinese  companies and continue to rely on the territory as an extension of  mainland capital markets. 

Photo: Pixabay

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China, Democrats, and Donald Trump

Democrats, and their media and Hollywood allies, have generally responded harshly to Republican Presidential candidates. One example, “Bush Derangement Syndrome,” became well known during the first decade of the 21st Century. However, the reaction to the election of Donald Trump was in a league of its own, with statements, violence, false impeachment charges and other actions that reached a level of hysteria not previously seen in a presidential election since Abraham Lincoln ran for the White House to the dismay of Democrats in the 1800’s.

To some extent, the level of hatred was surprising. Yes, Trump was a Republican, but he certainly was not seen as a hyper-partisan Republican nor, at least initially, a doctrinaire conservative. He did not appeal to what has frequently been portrayed as a stereotypical GOP supporter. Indeed, many within his own party bitterly disdained him.

He did, however, take several positions that cut to the heart of business as usual in Washington. He attacked the entrenched bureaucracy. He vigorously sought to clamp down on illegal immigration, which Democrats see as a source of future, and perhaps current, support.

And, perhaps above all else, he staunchly opposed China. Recent revelations concerning the impact of Chinese influence, particularly on Joe Biden and the California Democrat Party, require a deeper examination on how this affected Democratic and media reaction to the 45th President.

A key California industry, and one that is also highly influential in that state’s politics, is, of course, the movie business. Hollywood moguls, never known for their moral standards, pander to the China’s rulers for two main reasons.  First, they do not wish to offend a big-bucks investor in their industry.  Chinese companies have invested $4.5 billion in Hollywood assets. Second, the lure of selling tickets to China’s billion-plus citizens inhibits them from producing films, or taking positions, that offend Beijing.

Clearly, President Trump’s strengthening of the American backbone against China’s unfair trade practices, intellectual property theft, and military threats did not sit well with Beijing, and that nation’s rulers used their leverage on Hollywood to gain an ally in the fight against him.

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A similar analysis could be made about another of California’s key industries, social media.  Like Hollywood, it has a heavy presence in the state, and they too look to the vast population and financial opportunities of China with hungry eyes.  Similar to Hollywood, they have been vociferous and diligent in their opposition to the Trump White House.

The barons of both the movie and social media industries used their public access and financial leverage to create a false sense of crisis, censor opposing viewpoints, and support politicians who vociferously attacked President Trump.

How successful was this exercise of media and entertainment domination? Consider this: No event has caused more civilian deaths and economic disaster in America than COVID-!9.  it is manifestly evident that China, whether through malevolence, incompetence or both, is singularly responsible for this. Despite that, there has been extraordinarily little expression of anger against that nation seen in internet, TV, or print news and entertainment venues. Remarkably, the social media, entertainment and news industries have managed to deflect what should have righteous fury over the virus into infighting within the nation.

Similarly, exposures of links, through negligence or greed, between elected officials and Chinese agents has produced little in the way of mass expressions of outrage.  Instead, praise was heaped upon California politicians, including Rep. Eric Salwell, who it was recently discovered to have had a relationship with a Chinese agent, and spent the past four years seeking to impeach Trump on fabricated charges. That effort was led by Speaker Nancy Pelosi and Rep. Adam Schiff, both products of the California Democrat Party.

The New York Times noted last January, “As the Senate trial of Mr. Trump barrels ahead in Washington, California is playing an outsized role. It has lawmakers who have been leading the investigation of Mr. Trump for months.”

Illustration: Pixabay

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NATO Examines its Future

Earlier this years, NATO Secretary General Stoltenberg appointed an independent study group for the purpose of examining the organization’s challenges in the coming decade.

The Secretary General particularly tasked the researchers with providing recommendations in three areas:  reinforcing unity, solidarity, and cohesion, and cementing the alliance; increasing political consultation and coordination between NATO members; and Strengthening NATO’s political role to address current and future challenges.

Their research, just released, indicates that NATO must adapt to meet the needs of a more demanding strategic environment marked by the return of systemic rivalry, persistently aggressive Russia, the rise of China, and the growing role of emerging and destructive technologies, at the same time that it faces elevated transnational threats and risks.

The group notes that “The overarching political objective for NATO must be to consolidate the transatlantic Alliance to ensure that it possesses the tools, cohesion, and consultative attributes to provide collective defence in this more challenging landscape. NATO’s political dimension must adapt in order to maintain and strengthen its efficiency as well as ensuring its relevance for all Allies.”

 Among the key recommendations:

1. Allies should seek to preserve NATO’s three core tasks and enhance its role as the unique and essential transatlantic forum for consultations; it should update content related to the principles undergirding the NATO Alliance, changes to the geostrategic environment (including both Russia and China), and the need to incorporate terrorism more fully into NATO’s core tasks.   

2. NATO should continue the dual-track approach of deterrence and dialogue with Russia. The Alliance must respond to Russian threats and hostile actions in a politically united,determined,  and coherent way, without a return to ‘business as usual’ barring alterations in Russia’s aggressive behaviour and its return to full compliance with international law. At the same time, NATO should remain open to discussing peaceful co-existence and to reacting positively to constructive changes in Russia’s posture and attitude. NATO should evolve the content of its dual-track strategy to ensure its continued effectiveness by raising the costs for Russian aggression and develop a more comprehensive response to hybrid forms of Russian aggression, while at the same time supporting  increased political outreach to negotiate arms control and risk reduction measures.  

3. NATO must devote much more time, political resources, and action to the security challenges  posed by China – based on an assessment of its national capabilities, economic heft, and the stated  ideological goals of its leaders. It needs to develop a political strategy for approaching a world in  which China will be of growing importance through to 2030. The Alliance should infuse the China  challenge throughout existing structures and consider establishing a consultative body to discuss all  aspects of Allies’ security interests vis-à-vis China. It must expand efforts to assess the implications  of China’s technological development and monitor and defend against any Chinese activities that  could impact collective defence, military readiness or resilience in the Supreme Allied Commander  Europe’s (SACEUR) Area of Responsibility.  

4. Emerging and disruptive technologies are a challenge but also opportunity for NATO. Competing with the efforts underway by large authoritarian states to achieve dominance in key EDTs must be a strategic priority for the Alliance and its members. NATO should serve as a crucial coordinating institution for information-sharing and collaboration between Allies on all aspects of EDTs that have  a bearing on their security. NATO should hold a digital summit of governments and private sector with the aim of identifying gaps in collective defence cooperation in security-related AI strategies, norms, and research and development (R&D), and safeguarding against the malign and aggressive use of AI.  

5. Terrorism poses one of the most immediate, asymmetric threats to Allied nations and citizens.  NATO should more explicitly integrate the fight against terrorism into its core tasks. This fight should be given a place within NATO structures, supported by necessary resources, commensurate with the threat that it poses. NATO should enhance the fight against terrorism as part of the hybrid and cyber conversation and ensure that the threat from terrorism figures in exercises and lessons learned. NATO should strive to improve current practices of intelligence-sharing among Allies to achieve better, common situational awareness in key areas including emerging safe havens and terrorists’ use of EDTs, as well as hybrid tactics.  

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6. NATO must articulate a consistent, clear, and coherent approach to the South, addressing both       traditional threats like terrorism, and the growing presence of Russia and to a lesser extent China. NATO must maintain political focus on building up military preparedness and response for the southern/ Mediterranean flank, in particular by revising and delivering its Advance Plans and strengthening the Hub for the South at JFC Naples. NATO should strengthen ties and cooperation, especially with the EU, in the framework of a coordinated approach. It should increase the frequency of political consultations, including at the NAC level, on the South. Allies with specialist understandings and/or greater engagement should be asked to brief the NAC more frequently.  

7. NATO should reaffirm its support for arms control while maintaining an effective nuclear deterrence. It should play an enhanced role as a forum to debate challenges to existing arms control mechanisms and consult on any future arrangements. NATO should continue to support the strengthening of effective verification regimes and enable monitoring capabilities and enforcement mechanisms. It should develop an agenda for international arms control in key areas of EDT with military application. NATO should further adapt its defence and deterrence posture in the post Intermediate-Range Nuclear Forces (INF) Treaty setting to take into account the threat posed by Russia’s existing and new military capabilities. It should continue and revitalise the nuclear-sharing arrangements that constitute a critical element of NATO’s deterrence policy. 13

8. Climate change will continue to shape NATO’s security environment. While modulating emissions is  primarily a national competency, NATO has a role to play in increasing situational awareness, early  warning, and information sharing, including by considering the establishment of Centre of  Excellence on Climate and Security. It should build on efforts to include climate change and other  non-military threats such as pandemics in NATO planning on resilience and crisis management,  with an emphasis on making energy and telecommunications grids better able to withstand  weather events. NATO should revise its 2014 Green Defence framework and make more strategic  use of the Science for Peace and Security programme in order to develop and implement better  green military technology.  

9. Maintaining political cohesion and unity must be an unambiguous priority for all Allies. Allies on  both sides of the Atlantic must reaffirm their commitment to NATO as the principal institution for  the defence of the Euro-Atlantic area. Allies should pledge themselves to a code of good conduct to  abide by the spirit as well as the letter of the North Atlantic Treaty. Allies should maintain and meet agreed burden-sharing requirements. NATO should reassert its core identity as an Alliance rooted in the principles of democracy, and Allies should consider establishing a Centre of Excellence for Democratic Resilience dedicated to providing support to individual Allies, upon their request, for  strengthening societal resilience to resist interference from hostile external actors in the functioning  of their democratic institutions and processes. When disputes between Allies arise, the Secretary General should continue to provide his good offices and consider more closely involving other Allies  as informal mediators.  

10. The Group calls for transatlantic consultation to be strengthened in a systematic, credible, and  powerful manner. Allies must reaffirm the role of the North Atlantic Council as a genuine forum for  consultation on major strategic and political issues. Allies should strive to hold national policies to the line of policy developed at NATO. The Alliance should institute a practice whereby Allied Foreign Ministers make a periodic appraisal of the Alliance’s political health and development.  NATO should hold more frequent Ministerials and, when appropriate, expand their format. It should resume the practice whereby the number of annual Foreign Ministerials matches the number of  Defence Ministerials, with meetings alternating between NATO HQ and Allied capitals. It should hold more informal meetings and institute regular consultations on issues beyond the traditional  agenda, including meetings of NATO Political Directors or other senior officials for e.g., Middle East,  African, and East Asian affairs as well as cyber and other topics as appropriate.  

11. NATO and the EU should seek to reinvigorate trust and understanding at the highest levels. At the  next NATO Summit or the next available opportunity, it would be useful for NATO and EU Heads of  State and Government to meet in a special formal session to review the current state of the relation ship and examine areas for greater cooperation. The two organisations should create an institution staff link through a permanent political liaison element in NATO’s International Staff (IS) and the European External Action Service (EEAS). NATO should welcome EU efforts towards a stronger and more capable European defence capacity insofar as these strengthen NATO, contribute to  a fair transatlantic burden-sharing, and fully involve non-EU Allies. Ongoing European efforts should be better used to increase the share of European Allies in support of NATO capability targets.  

12. NATO should outline a global blueprint for better utilising its partnerships to advance NATO strategic interests. It should shift from the current demand-driven approach to an interest-driven approach and consider providing more stable and predictable resource streams for partnership activities.  NATO’s Open Door Policy should be upheld and reinvigorated. NATO should expand and strengthen partnerships with Ukraine and Georgia, seek to heighten engagement with Bosnia and Herzegovina, and counter destabilisation across the Western Balkans. NATO should energise the MediterraneanDialogue (MD) and the Istanbul Cooperation Initiative (ICI) through strengthened political  engagement, capacity building, and resilience enhancement. It should deepen cooperation with  Indo-Pacific partners, including by strengthening information-sharing and creating regularised  dialogues on technological cooperation and pooling of R&D in select fields.  

13. The principle of consensus is a cornerstone of the Alliance, but NATO must be diligent in ensuring that it remains capable of reaching and implementing decisions in a timely fashion. NATO should strengthen measures to ensure that consensus-based decisions are implemented and not diluted in follow-on work. It should consider bolstering the Secretary General’s chief executive role in order to make decisions on routine matters and to bring difficult issues into the open at an early stage. NATO should create a more structured mechanism to support the establishment of coalitions inside existing Alliance structures and should examine ways to time-limit decision making in crisis. To deal with the growing frequency of single-country blockages involving external bilateral disputes, it should consider raising the threshold for such blockages to the Ministerial level.  

14. With regard to political structure, staffing, and resources, NATO needs a strong political dimension to match its military adaptation. NATO should consider increasing the delegated authorities of the Secretary General to make meaningful decisions on personnel and certain budgetary matters.  It should institute a practice of outside-in audits of the administrative functioning of the organisation and require a functional review process once every five years.  Allies that make up a low proportion al share of the civil budget should raise their national contributions. NATO should establish a centre  of higher learning to cultivate future talent outside of NATO and launch a scholarship program,  tentatively called the Harmel Fellowship Programme, under which each Ally would fund a  scholarship programme for at least one individual every year from another NATO Ally to undertake  postgraduate

Illustration: NATO

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Congressional Report on the Russian/Chinese Threat

From the Congressional Research Service: (Summary)

The post-Cold War era of international relations—which began in the early 1990s and is sometimes referred to as the unipolar moment (with the United States as the unipolar power)— showed initial signs of fading in 2006-2008, and by 2014 had given way to a fundamentally different situation of renewed great power competition with China and Russia and challenges by these two countries and others to elements of the U.S.-led international order that has operated since World War II. 

The renewal of great power competition was acknowledged alongside other considerations in the Obama Administration’s June 2015 National Military Strategy, and was placed at the center of the Trump Administration’s December 2017 National Security Strategy (NSS) and January 2018 National Defense Strategy (NDS). 

The December 2017 NSS and January 2018 NDS formally reoriented U.S. national security strategy and U.S. defense strategy toward an explicit primary focus on great power competition with China and Russia.

 Department of Defense (DOD) officials have subsequently identified countering China’s military capabilities as DOD’s top priority.

The renewal of great power competition has profoundly changed the conversation about U.S. defense issues from what it was during the post-Cold War era: Counterterrorist operations and U.S. military operations in the Middle East—which had moved to the center of discussions of U.S. defense issues following the terrorist attacks of September 11, 2001, and which continue to be conducted—are now a less-dominant element in the conversation, and the conversation now features a new or renewed emphasis on the following, all of which relate to China and/or Russia:

 ∙ grand strategy and the geopolitics of great power competition as a starting point for discussing U.S. defense issues; 

∙ organizational changes within DOD; 

∙ nuclear weapons and nuclear deterrence; 

∙ the global allocation of U.S. military force deployments;

 ∙ U.S. and allied military capabilities in the Indo-Pacific region; 

∙ U.S. and NATO military capabilities in Europe; 

∙ new U.S. military service operational concepts;

 ∙ capabilities for conducting so-called high-end conventional warfare;

 ∙ maintaining U.S. superiority in conventional weapon technologies;

 ∙ innovation and speed of U.S. weapon system development and deployment;

 ∙ mobilization capabilities for an extended-length large-scale conflict; 

∙ supply chain security, meaning awareness and minimization of reliance in U.S. military systems on foreign components, subcomponents, materials, and software; and 

∙ capabilities for countering so-called hybrid warfare and gray-zone tactics. 

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The issue for Congress is how U.S. defense planning should respond to renewed great power competition, and whether to approve, reject, or modify the Trump Administration’s proposed defense funding levels, strategy, plans, and programs for addressing renewed great power competition. Congress’s decisions on these issues could have significant implications for U.S. defense capabilities and funding requirements. 

Issues for Congress Potential policy and oversight issues for Congress include the following: 

∙ December 2017 NSS and January 2018 NDS. Do the December 2017 NSS and the January 2018 NDS correctly describe or diagnose the renewal of great power competition? As strategy documents, do they lay out an appropriate U.S. national security strategy and national defense strategy for responding to renewed great power competition? 

∙ Defense funding levels. In response to renewed great power competition, should defense funding levels in coming years be increased, reduced, or maintained at about the current level? 

∙ U.S. grand strategy. Should the United States continue to include, as a key element of U.S. grand strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another? 67 If not, what grand strategy should the United States pursue? What is the Trump Administration’s position on this issue?68 

∙ DOD organization. Is DOD optimally organized for renewed great power competition? What further changes, if any, should be made to better to better align DOD’s activities with those needed to counter Chinese and Russian military capabilities? 

∙ Nuclear weapons and nuclear deterrence. Are current DOD plans for modernizing U.S. strategic nuclear weapons, and for numbers and basing of nonstrategic (i.e., theater-range) nuclear weapons, aligned with the needs renewed great power competition? 

∙ Global allocation of U.S. military force deployments. Should the global allocation of U.S. military force deployments be altered, and if so, how? 

What are the potential benefits and risks of shifting U.S. military force deployments out of some areas and into others? Should the Trump Administration’s proposals for changing the global allocation of U.S. military force deployments be approved, rejected, or modified?

 ∙ U.S. and allied military capabilities in the Indo-Pacific region. Are the United States and its allies in the Indo-Pacific region taking appropriate and sufficient steps for countering China’s military capabilities in the Indo-Pacific region? To what degree will countering China’s military capabilities in the Indo-Pacific region require reductions in U.S. force deployments to other parts of the world?

 ∙ U.S. and NATO military capabilities in Europe. Are the United States and its NATO allies taking appropriate and sufficient steps regarding U.S. and NATO military capabilities and operations for countering potential Russian military aggression in Europe? What potential impacts would a strengthened U.S. military presence in Europe have on DOD’s ability to allocate additional U.S. forces to the Indo-Pacific region? To what degree can or should the NATO allies in Europe take actions to strengthen deterrence against potential Russian aggression in Europe? 

∙ New operational concepts. Are U.S. military services moving too slowly, too quickly, or at about the right speed in their efforts to develop new operational concepts in response to renewed great power competition, particularly against improving Chinese anti-access/area-denial (A2/AD) forces? What are the potential merits of these new operational concepts, and what steps are the services taking in terms of experiments and exercises to test and refine these concepts? To what degree are the services working to coordinate and integrate their new operational concepts on a cross-service basis? 

∙ Capabilities for high-end conventional warfare. Are DOD’s plans for acquiring capabilities for high-end conventional warfare appropriate and sufficient? In a situation of constraints on defense funding, how should trade-offs be made in balancing capabilities for high-end conventional warfare against other DOD priorities? 

∙ Maintaining U.S. superiority in conventional weapon technologies. Are DOD’s steps for maintaining U.S. superiority in conventional weapon technologies appropriate and sufficient? What impact will funding these technologies have on funding available for nearer-term DOD priorities, such as redressing deficiencies in force readiness? 

∙ Innovation and speed in weapon system development and deployment. To what degree should defense acquisition policy and the paradigm for assessing the success of acquisition programs be adjusted to place greater emphasis on innovation and speed of development and deployment, and on experimentation, risk taking, and greater tolerance of failure during development? Are DOD’s steps for doing this appropriate and sufficient? What new legislative authorities, if any, might be required (or what existing provisions, if any, might need to be amended or repealed) to achieve greater innovation and speed in weapon development and deployment? What implications might placing a greater emphasis on speed of acquisition have on familiar congressional paradigms for conducting oversight and judging the success of defense acquisition programs? 

∙ Mobilization capabilities. What actions is DOD taking regarding mobilization capabilities for an extended-length conflict against an adversary such as China or Russia, and are these actions appropriate? How much funding is being devoted to mobilization capabilities, and how are mobilization capabilities projected to change as a result of these actions in coming years?

Supple chain security. To what degree are Chinese or Russian components, subcomponents, materials, or software incorporated into DOD equipment? How good of an understanding does DOD have of this issue? What implications might this issue have for the reliability, maintainability, and reparability of U.S. military systems, particularly in time of war? What actions is DOD taking or planning to take to address supply chain security, particularly with regard to Chinese or Russian components, subcomponents, materials, and software? What impact might this issue have on U.S.-content requirements (aka Buy America requirements) for U.S. military systems?

.Hybrid warfare and gray-zone tactics. Do the United States and its allies and partners have adequate strategies for countering Russia’s so-called hybrid warfare in eastern Ukraine, Russia’s information operations, and China’s socalled salami-slicing tactics in the South and East China Seas?

Photo: n the Irkutsk region, a large-scale command and staff exercise of the strategic missile forces (SMF) was completed, in which more than 3 thousand military personnel took part and about 300 pieces of equipment were involved. This event was the first after the complete re-equipment of the Irkutsk missile formation to the “Yars” mobile complex. (Russian Defense Ministry)

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Countering the China Model

China is seeking to replace the American model of freedom with its own brand of authoritarian rule and the denial of individual liberty throughout the Indo-Pacific region.

Freedom House notes that The Beijing regime has established an authoritarian political system controlled by the Chinese Communist Party. Since 2007, Chinese authorities have tightened official controls over the media and civil society, and backtracked on legal reforms they enacted in the 1990s and early 2000s.  The ruling Communist Party has chosen to prioritize party control at the expense of building autonomous legal and political institutions. Chinese authorities routinely suppress dissidents who attempt to peacefully exercise their constitutional rights.

The threat is that China seeks to export its dictatorial model. The Washington Post notes that China’s President Xi Jinping is eager to do so. In numerous speeches, beginning at least at the 19th Party Congress in October 2017, Xi has reiterated his belief that “[China] offers a new option for other countries and nations…”

The Council of Foreign Relations concurs with that view, noting that In recent decades, China has captivated the world with its ambitious foreign policy. A major part of this story is China’s Belt and Road Initiative, a massive infrastructure and trade project that has poured billions of dollars into developing nations. But some scholars say that China is also seeking to export its authoritarian model of government and erode global democratic norms.

The Trump Administration has responded with its “Indo-Pacific Transparency Initiative.”

The effort includes more than 200 programs, costing $1 billion, that promote civil society, rule of law, and transparent and accountable governance across the region. They focus on anti-corruption and fiscal transparency, democracy assistance, youth and emerging leader development, media and internet freedom, and protecting fundamental freedoms and human rights.

The programs are broadly categorized as combatting corruption, promoting fiscal transparency, aiding democratic practices, assisting youth and emerging leaders in understanding free government practices, encouraging media and internet freedom, and advocating human rights and fundamental freedoms.

The anti-corruption efforts include the work of the Global Anti-Corruption Consortium, an effort that brings together investigative journalists and advocacy groups to expose corruption and drive reform.

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There are a number of examples of how the Initiative has operated.

Along with Australia, the U.S. is supporting democratic elections in Burma. The programs equip political parties, women, and youth candidates with an improved understanding of election procedures and regulations and enable Burma’s emerging leaders, including women, young adult candidates, and future political leaders, to attend Leadership Training Schools. Activities will also support international election observers and post-election dispute resolution.

In the Pacific Islands, USAID assisted the Autonomous Region of Bougainville in Papua New Guinea and Solomon Islands by providing technical assistance to the Electoral Commission during the August 2020 election period, promoting inclusivity and the safe conduct of elections during a pandemic

Another endeavor, the Young Southeast Asian Leaders Initiative promotes civic engagement and emerging leader development. Next year, this part of the Initiative will focus on human capital and healthcare, citizen journalism, good governance and civil society, and digital governance and digital economy.

No Initiative, no matter how generous or skillfully planned, will be effective if regional governments are forced to live in fear of Beijing’s military might and its willingness to use it. Over the next four years,  the success of State Department efforts will require a creditable military deterrent from the U.S. and its allies.

Both in terms of trade and defense, the future of the 21st Century depends on the political development of the Indo-Pacific region.  Unfortunately, with the rise of China’s military strength and economic influence, that future has appeared somewhat bleak.  The Trump Administration has sought to exercise both military funding increases and diplomatic initiatives to change that course.

Photo: Pixabay

Categories
Quick Analysis

Foreign Policy Update

SUDAN

Secretary of State Michael Pompeo, in a written statement, said that with the enactment of the Consolidated Appropriations Act on December 28, the way is clear for victims of the 1998 East African Embassy bombings, the 2000 attack on USS Cole, and the 2008 murder of USAID employee John Granville, to receive long-awaited compensation for their immeasurable losses. According to the State Department, achieving compensation for these victims of terrorism has been a top priority. 

Pompeo said that the enactment of this legislation “represents a fundamental change in Sudan’s relationship with not only the United States but also the entire international community. It removes a major impediment to Sudan’s full reintegration into the global economy by reducing the risk of attachment of Sudan’s assets, opening the possibility for substantially increased trade and investment.”

BAHRAIN

Developments in the Middle East are continuing at a fast pace after the November presidential election. In December, the US launched the Bahrain Strategic Dialogue to broaden and elevate the US-Bahrain bilateral partnership. Its focus is on cross-cutting priority areas of cooperation to enhance prosperity through trade and investment, strengthen mutual security, and build understanding through people-to-people exchanges in education, culture, science, and environment. The two countries are working closely together to maximize opportunities to accelerate their mutual peace and security objectives, including combatting human trafficking, labor and human rights standards, and advancing women’s rights. 

CHINA

The United States strongly condemned China’s “sham prosecution and conviction of citizen journalist Zhang Zhan” on December 28. Pompeo called on the PRC government to release her “immediately and unconditionally.” He said: “The Chinese Communist Party has shown once again it will do whatever it takes to silence those who question the Party’s official line, even regarding crucial public health information.” Pompeo said that “Her hasty trial, to which foreign observers were denied access, shows how fearful the CCP is of Chinese citizens who speak the truth.”

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Referring to the Wuhan virus, Pompeo added that “lying is a feature,” not a bug of authoritarian regimes. The CCP restricted and manipulated information about the COVID-19 outbreak in Wuhan from the start and brutally silenced other brave truth-tellers, such as Dr. Li Wenliang, Chen Qiushi, and Fang Bin. In a written Statement this week Pompeo said that due to the “CCP’s gross malfeasance, the rest of the world relied heavily on uncensored reports from citizen journalists like Zhang to understand the true situation in Wuhan after the CCP-imposed strict media controls were enforced and a controllable outbreak turned into a deadly global pandemic.” China’s fear of transparency and its ongoing repression of fundamental freedoms. Pompeo pointed out, are a “sign of weakness, not strength, and a threat to all of us.”  

RUSSIA-LIBYA

In December, Russian Foreign Minister Sergei Lavrov accused the United States of playing political games in the Mediterranean and stalling the appointment of a new UN Special Representative of the Secretary-General in Libya.  Pompeo said that it’s “unfortunate and unhelpful that Mr. Lavrov again gets the facts wrong and attempts to rewrite history.”

The United States is working actively with allies and partners in the Eastern Mediterranean to promote greater stability, security, and prosperity, according to the State Department.  In Libya, Pompeo added, the United States “supports the formation of an inclusive government that can secure the country and meet the economic and humanitarian needs of the Libyan people.”  

The overarching US goal remains to bring Libyan parties to a negotiated, inclusive UN-facilitated political solution through the Libyan Political Dialogue Forum.  The United States is urging the United Nations to help accomplish this goal. Pompeo said: “To this end, the United States worked with our partners on the UN Security Council to strengthen the UN system and create a UN Special Envoy position and a complementary UN Support Mission in Libya (UNSMIL) Coordinator in UNSMIL’s 2020 mandate renewal.” Russia and China were the only UNSC members to abstain on the Security Council resolution renewing UNSMIL’s mandate.

DARIA NOVAK served in the United States State Department during the Reagan Administration, and currently is on the Board of the American Analysis of News and Media Inc., which publishes usagovpolicy.com and the New York Analysis of Policy and Government.  Each Saturday, she presents key updates on U.S. foreign policy from the State Department.

Illustration: Pixabay

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Quick Analysis

China’s Aircraft Carriers

Aircraft carriers matter. Modern aircraft carriers matter more. 

Another year has passed in China’s decades-long journey toward global maritime domination. It surpassed the US Naval fleet in size in 2019 and continued to expand its lead in 2020. From China’s perspective it is moving closer to achieving its rightful place by imposing its world view on other nations and peoples. One area of great concern is the development of its PLAN (People’s Liberation Army Navy). Three decades ago, the Chinese Navy did not possess over-the-horizon radar, which is needed to sail outside its coastal “green” waters. 

Today, China possesses a blue water navy that is expanding at a fast pace with extensive qualitative improvements, although still lagging well behind the United States in capabilities. At current production rates China will have more than 330 warships within a few years, with possibly 430 surface ships and 100 submarines by 2030. Sanya, China’s newest naval base on Hainan Island is complete with a covered port for basing and maintaining submarines. It sits at the edge of the South China Sea near contested waters belonging to Vietnam, Thailand, and the Philippines. In 2020 China conducted live-fire, naval anti-ship drills there using its Harbin Z-9 helicopters stationed against simulated targets.        

It was only a year ago that China’s first aircraft carrier, the Liaoning, was commissioned officially after finishing 18 months of sea trials. The ship’s structure was built in Russia and can launch 24 Shenyang J-15 multirole fighter aircraft. It represents a significant advance in naval warfare capabilities for China. Although smaller and less capable than the USS-Nimitz-class, the Liaoning is fast and has a modernized command center. The Shandong, China’s second aircraft carrier, was reverse engineered from the Liaoning. It is China’s first domestically built carrier. The Liaoning finished its third sea trial on December 21, 2020. US military analysts expect it to be fully operational by August 2024.

The communist giant is continuing the expansion and upgrading of its navy in 2020 with construction of a third aircraft carrier. Although not yet finished it is expected to feature a new generation of catapult launching system that will be able to launch more aircraft with heavier weapons than China’s two existing carriers based which are based on Cold War-era Soviet designs. China is not only building ships, it is joining actively with Russia to conduct maritime exercises. 

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China has deployed UUV’s (unmanned underwater vehicle’s) capable to aiding subs hiding in waters throughout the South China Sea and Indian Ocean. Its long-range UUV Sea Wing gliders can operate for months on end and have traveled deep in waters in the Indian Ocean, among other regions. Information from the UUV’s could be used to help Chinese naval vessels traverse the region or aid in blocking commercial traffic transporting products across the globe. The PLAN runs about four to five surface ships concurrently in the IOR (Indian Ocean Region) mapping out the best submarine routes.

In Asian waters Beijing expanded and fortified its naval bases on artificially-built islands in contested and strategically important areas of the South China Sea. It now has seven artificial islands which cover about 3,200 acres of coral reefs in the disputed Spratly archipelago. It is using these to support aircraft carrier and carrier-launched fighter planes. 

China has intensified its demonstration of naval power throughout the South China Sea, IOR, and beyond in what appears to be a new maritime era. There is no slowdown in sight. Beijing’s total defense budget currently exceeds the combined totals of Japan, South Korea, the Philippines, and Vietnam. In comparison to the United States China has little experience in operating integrated carrier battle groups, but that is only a matter of time before it is on par with the US and other major naval powers, according the naval analysts.

DARIA NOVAK served in the United States State Department during the Reagan Administration, and currently is on the Board of the American Analysis of News and Media Inc., which publishes usagovpolicy.com and the New York Analysis of Policy and Government.  Each Friday, she presents key updates on China.

Photo: A jet takes off from the deck of the CNS Liaoning. (China Defence Ministry)