How to Deal with Chinese Assertiveness: It's Time to Impose Costs

While avoiding the extreme positions of escalating conflict or doing nothing, the United States and its allies need to think through the full panoply of countermeasures to help fashion a strategy for countering coercion. 

China’s reemergence as a wealthy and powerful nation is a fact. In recent decades its rise has been unprecedented, moving from the tenth-largest economy in 1990, to the sixth-largest economy in 2001, to the second-largest economy in 2010. According to the International Monetary Fund (IMF), China now surpasses the United States in terms of purchasing power parity. By the same measure, China’s economy was only half the size of America’s a decade earlier, and it is this trajectory that is molding assumptions about the future regional power balance and order across the Indo-Pacific. Recent declines in growth and rising questions about future stability have yet to alter most perceptions about tomorrow’s China.

China’s deepening integration with the regional and global economy underscore the difficulty of pushing back when China transgresses rules and norms. Take the issue of infrastructure. Infrastructure will gradually redraw the strategic economic and security connectivity of the twenty-first century, and China’s infrastructure prowess has been on prominent display of late. President Xi initiated the recent Asia-Pacific Economic Cooperation (APEC) forum with a speech touting the linear projection that China will invest some $1.25 trillion over the next decade overseas, and wants to invest $40 billion in re-establishing the old Silk Road while also building a new Maritime Silk Road. These sums are in addition to China’s proposal for a new $50 billion Asia Infrastructure Investment Bank. Like the New Development Bank (previously called The BRICS Development Bank), these schemes chip away at the existing Bretton Woods international economic architecture with bodies of uncertain governance. As Indian Union Commerce Minister Nirmala Sitharaman put it at a recent conference, “If Bretton Woods institutions will not provide infrastructure financing for emerging economies, then we will have to find alternatives.”

China is filling a vacuum in infrastructure financing. But rather than reflexively opposing and expecting friends in Indonesia, India, and elsewhere to turn aside opportunity, the United States would be far better off seeking to create opportunities through existing institutions. The United States should be reinvigorating existing economic institutions like the IMF, World Bank, and the Asian Development Bank, while ensuring that any new institutions adhere to transparent and based on agreed-upon principles.

The Difficulty of Trust-Building

To listen to some analysts, the focus of Sino-American relations should be on trust-building. But talking about trust is not the same thing as increasing trust. Not even confidence-building measures (CBMs) aimed at reducing military tensions are guaranteed to reduce such tensions.

Take the recent bilateral summit meeting between President Xi and President Barack Obama on the margins of the APEC summit. The atmospherics were cordial, there were no substantive changes over territorial and sovereignty issues—or for that matter, any of the most neuralgic security issues driving strategic competition in the Asia-Pacific. China committed itself to nothing specific or binding. The United States accommodated the appearance of improved military-to-military relations despite a lack of any substantive measure. Two confidence-building measures received a lot of press, but they are at best frameworks on which to build rather than new agreements. A CBM on Rules of Behavior for the Safety of Air and Maritime Encounters at this point creates a military-to-military dialogue on avoiding surface ship collisions, but neither side is committed to anything that it was not already obligated to under existing international accords. Over time, of course, as new annexes are added and dialogue progresses, perhaps this will provide the basis for more predictability in military operations. The other CBM on the Notification of Major Military Activities is more encouragement than direction, and what constitutes a major strategic development is totally vague. At best, the measures provide a basis for future cooperation. The same can be said with regard to calls for progress on moving from a Declaration of Conduct to a Code of Conduct, even while China continued to build artificial islands and potentially military installations from submerged features in the South China Sea.