China’s reopening, America’s challenge
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China’s reopening, America’s challenge

China is likely to emerge from its Covid-19 isolation a more potent competitor for influence in Asia. First published in The Straits Times.

For the past three years, China’s strategic power has been hobbled by tough zero-Covid restrictions. The country’s self-imposed isolation was longer and harsher than that of any other major country in the world.

As China goes through a turbulent reopening, some in the United States may take comfort from seeing the country it describes as its most challenging competitor flounder. Yet, China is likely to emerge from its isolation a more potent and formidable competitor for influence. The US will have to adapt its strategy if it is to compete effectively.

The Lowy Institute Asia Power Index, launched on Monday, shows that the US remains the most powerful country in Asia, and leads on six out of eight measures of power. In fact, China has failed to close the gap with the US over the past five years.

Even so, the Asia Power Index, which draws on more than 130 data-driven indicators, does demonstrate that China has important strengths, including in terms of its economic relationships with the region and its diplomatic influence, a measure on which it has narrowly surpassed the US this year.

Our data suggests that for the past three years, and especially in 2022, China has been competing with one arm behind its back. Air traffic in and out of the country plummeted, and even the few flights operated under capacity. The flow of tourists, businessmen and students dwindled. Foreign capital investment into and out of China shrank. The loss of these flows hurt China’s neighbours. Many urged China to reopen long before it did.

The Asia Power Index 2023 reveals the true cost of these restrictions on China: It registered the largest decline in comprehensive power of any country in Asia.

The year ahead promises to be an inflection point for China’s power in Asia. The country will no longer be competing with one arm tied behind its back.

International students from the global south are already returning to China’s universities. Quiet border towns in China’s near abroad will regain their vibrancy. Hamstrung Belt and Road projects, such as an underused rail link to neighbouring Laos, may finally reach their potential. China will seek to shore up its central position in regional supply chains. Academic, cultural and media exchanges, which China has promoted vigorously in recent years, will scale back up.

Importantly, China never allowed Covid-19 closures to impact its elite diplomacy. Former foreign minister Wang Yi held many more meetings with counterparts in Asia in both 2021 and 2022 than his US counterpart Antony Blinken.

And while Beijing’s network of defence relationships in Asia still lags Washington’s, the pandemic did not prevent China from stepping up meetings with counterpart defence officials in Asia.

The US should not underestimate the challenge that China will pose when it is again able to combine this formal diplomacy with its traditional strengths in Asia: proximity and connectivity.

This does not mean that China will overtake or supplant US power in Asia. US advantages are durable. Beijing has reason to envy the US’ superior military and defence networks, and its deep reserves of cultural influence and soft power. New figures showing that China’s population has shrunk underscore the US’ far more favourable outlook, with a demographic dividend still to come.

However, the Biden administration will need to adapt its strategy to compete with China in 2023.

The US is right to prioritise investment in its own national strengths. It will retain a long-term edge over China if it successfully prioritises education, research and innovation in technology, and the resilience of its institutions, including its democracy.

Yet, our data calls into question the Biden administration’s heavy reliance on working with allies and partners.

A chasm separates the region’s superpowers, the US and China, and the region’s “middle powers”, including Japan and India.

Japan’s economic sway is ebbing, while a new security role is only slowly taking shape. Despite its size, India’s influence is primarily limited to South Asia, and even there its influence is waning. These partners may be less decisive in the regional balance than Washington hopes.

Instead, the US needs to correct its own areas of weakness in the competition with China.

Australian Foreign Minister Penny Wong recently put a forthright case for greater US economic engagement in Asia, arguing that this was essential to maintaining a favourable regional “equilibrium”. Put more bluntly by Australia’s future ambassador to the United States, Mr Kevin Rudd, the missing element of US strategy in Asia is “the economy, stupid”.

These comments indicate a depth of concern among US partners that the Indo-Pacific Economic Framework deal being negotiated by the Biden administration with regional partners will amount to nothing.

Ultimately, China need not catch up to the US to challenge US power in Asia or cause smaller neighbouring countries headaches.

In 2022, its relatively weaker position did not prevent it from continuing to develop its military capabilities and deploying them in new and worrying ways. As China reopens in 2023, Beijing’s challenge to the US and its allies will be more pressing than ever.

Areas of expertise: Indo-Pacific strategy; Australian foreign policy; Southeast Asia.