- Chinese President Xi Jinping's move to impose new national security laws on Hong Kong is just one of his many calculated wagers designed to leverage Covid-19's disruptions for greater domestic control and global gain.
- Most intriguing and least noticed, "China became the first major economy to conduct a real-world test of a national digital currency," wrote Aditi Kumar and Eric Rosenbach this week in Foreign Affairs.
- The impact of that move, over time, could have greater global impact than anything Beijing does in Hong Kong or even to Taiwan.
This is the way new eras unfold – gradually at first and then suddenly.
Chinese President Xi Jinping's apparent rolling of the dice on Hong Kong ahead of this week's National People's Congress is just one of his many calculated wagers designed to leverage COVID-19's disruptions for greater domestic control, regional influence and global gain.
China's move to impose new national security laws on Hong Kong, the most serious threat yet to the city's democratic self-governance and territorial autonomy, prompted a 5.6% decline in the Hang Sang Index (the worst one-day performance in five years).
Beyond that, the decision could ignite new Hong Kong pro-democracy protests, it should raise new concerns about Taiwan's sovereignty, it will feed the growing deterioration of U.S.-Chinese relations, and it may contribute to anxiety among world democracies about what values a Chinese-led world order might reflect.
Seen in isolation, some analysts see the surprise Hong Kong move as reckless.
Put the decision beside other recent actions, however, and the pieces fit neatly together into President Xi's long-standing strategic purpose: strengthening the party's domestic hold, solidifying China's regional power and expanding its international influence – all in a sharpening competition with the United States.
Those recent actions include, but aren't limited to, new technology investments of an estimated 10 trillion yuan ($1.4 trillion) over six years to 2025, reports that China's defense budget will grow by up to 9%, and its increased efforts to influence multilateral institutions as the Trump administration retreats, most recently through Beijing's $2 billion contribution to the World Health Organization.
Most intriguing and least noticed, "China became the first major economy to conduct a real-world test of a national digital currency," wrote Aditi Kumar and Eric Rosenbach this week in Foreign Affairs. They describe a pilot project in four large Chinese cities which the authors see as putting China years ahead of the United States in developing this "central component of a digital world economy."
The impact of that move, over time, could have greater global impact than anything Beijing does in Hong Kong or even to Taiwan.
"U.S. policymakers are unprepared for the consequences," Kumar and Rosenbach write. In general, digital currencies weaken the power of U.S. sanctions and the ability of U.S. officials to track illicit financial flows. More specifically, a digital yuan combined with China's advanced electronic payment systems may provide a more effective platform for future influence than a fleet of aircraft carriers.
I argued in this space three weeks ago that President Xi and his Chinese Communist Party, by emerging as the first major world economy to end virus lockdowns and restore growth, were seizing a window of opportunity – one that could close as rapidly as it had opened.
"Great historical progress always happens after major disasters," President Xi said recently at Xi'an Jiaotong University, telling professors and students of Chinese sacrifices of the past and the possibilities of the moment. "Our nation was steeled and grew through hardship and suffering."
Those who wish to counter or contain President Xi's ambitions, would do well to study their origins and the deeper meaning in his use of that carefully selected word, "steeled." It is the same word his father, Xi Zhongzun, used to describe the impact of his time in prison.
In The New York Times this week, Steven Lee Meyers and Chris Buckley chronicle how President Xi's father, "a famous revolutionary leader, was purged and held in solitary confinement under Mao Zedong." President Xi as a young man grew up in the shadow of his father's disgrace, was denounced by his own mother and then was exiled from Beijing to village labor for seven years.
It's a matter for conjecture how this molded President Xi and resulted in his apparently unshakable party loyalty and leadership today. Whatever President Trump's commitment to this contest and his re-election might be, he would be wise not to underestimate President Xi's determination.
Chinese anti-U.S. rhetoric has become disturbingly blunt, particularly when directed at President Trump and Secretary of State Mike Pompeo.
Hu Xinjin, editor of the state-controlled Global Times and regarded as an unofficial government spokesman, tweeted his response to President Trump's claim that China wanted former Vice President Joe Biden to defeat him.
"On the contrary," he tweeted, "Chinese netizens wish for your reelection because you can make America eccentric and thus hateful for the world. You help promote unity in China and you also make intl news as fun as comedy."
It's the wrong question to ask whether coronavirus has rendered China as a stronger or weaker player on the world stage.
It is weaker economically and reputationally, yet more determined geopolitically. It is more fragile and dangerous simultaneously. Even as the Xi's National People's Congress ditched its growth target for the first time, with a first quarter contraction of 6.8%, it at the same time moved on Hong Kong and ratcheted up actions against "foreign influence."
That said, America's greatest weakness is its "Pogo problem," referring to the often-repeated phrase from the Walt Kelly cartoon character of the 1960s, who said, "We have met the enemy and he is us." Hard as it is to think and act for the long term in an election year, that's precisely what the United States must do.
Here are just three suggested prongs of that strategy:
1. Strategic patience and defense reform. Washington must avoid major power military conflict, even more devastating in our modern age, while robustly reasserting Asia deterrence to shore up allied confidence. This is also a good time, with defense budgets likely declining, to invest more in future technologies and divest from high-cost legacy systems that have powerful political constituencies but declining real-world value.
2. Investing in American technology, infrastructure and jobs. As Stephen Hadley and Anja Manuel laid out in The Washington Post, the Trump administration should use the next stimulus package to invest in broadband, digital infrastructure, research and development, advanced semiconductors and strategic education in science, technology, engineering and mathematics.
3. Embracing allies and leading multilaterally. Former Swedish Prime Minister Carl Bildt provided a glimpse of "the post-American world on full display" from this week's annual assembly of the World Health Organization. Whatever you think of the WHO or multilateral bodies, it's hard to see how U.S. interests are served by Bildt's description of a more assertive and confident Beijing, an absent United States and a Europe hedging its bets to limit the multilateral damage.
These are just three potential elements of a new American approach to regain some initiative, betting over the long term on our self-correcting ability to reinvent and the inherent brittleness of autocracies.
The challenge is only partly Chinese intentions. The greater problem rests in the lack of an American strategy equal to our times.
Frederick Kempe is a best-selling author, prize-winning journalist and president & CEO of the Atlantic Council, one of the United States' most influential think tanks on global affairs. He worked at The Wall Street Journal for more than 25 years as a foreign correspondent, assistant managing editor and as the longest-serving editor of the paper's European edition. His latest book – "Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth" – was a New York Times best-seller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe here to Inflection Points, his look each Saturday at the past week's top stories and trends.
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