Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

APEC: China and the US Their
Game Plans
Carlyle A. Thayer
November 9, 2017

We request your assessment of the following issues:

Q1. What do the US and China want from each other after the visit of President
Trump to Beijing?
ANSWER: Xi Jinping wants the United States to acknowledge China as an equal,
Chinas dominant role in the Asia-Pacific, and to respect Chinas self-defined core
interests. Xi also wants the United States to cooperate with China on a range of
regional and international issues to signal to the world that China is now a major
power.
Beijing wants the United States to accept that even if China applied further sanctions
on North Korea that would not solve the issue of nuclear proliferation. China also
wants to give more prominence to diplomacy to resolve the North Korean issues and
get the United States to cease provocative actions that could lead to armed conflict.
China also wants the United States to end restrictions of the exports of high-level
technology to China.
Donald Trump wants China to apply further sanctions on North Korea such as a cut in
oil exports and the expulsion of Korean workers in China. Trump believes that
Chinese pressure is indispensable to ending ballistic missile and nuclear tests in
North Korea. Trump also wants China to end restrictive trade policy and to balance
bilateral trade. Trump views the US-China relationship as transactional, dealing issue
by issue. In other words, President Trump is not seeking a G2 relationship in which
the United States and China set the regional and global agenda.
Q2, President Xi Jinping has gained big achievement after the 19th National Congress
of the Chinese Communist Party. Some experts consider President Xi as the most
powerful leader of China after Maos era. Could you give your assessment on
possible changes in foreign policy toward Asia Pacific on issues such as North Korea
and the South China Sea?
ANSWER: The 19th Congress ratified Xis past policies and there will be more
continuity than change. China will hold firm on its policy towards North Korea. China
is opposed to North Koreas ballistic missile and nuclear tests because they are
destabilizing. China also does not want the Kim Jong-un regime to collapse and for a
reunified Korea to emerge in which South Korea is dominant and remains as ally of
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the United States. China also opposes provocative statements and actions by Trump
and the U.S. military.
It was notable that Xis work report to the 19th congress mentioned the construction
of artificial islands in the South China Sea as one of his accomplishments. China has
set two conditions on negotiating a Code of Conduct: first, that the situation in the
South China Sea remains generally stable and second that there is no interference by
outside powers (read the United States). China will continue to pursue the
diplomatic path while gradually consolidating its military position in the South China
Sea.
China will become more assertive on the regional and global stage to support Chinas
rise in the expectation that other countries will either accept or acquiesce to Chinas
leadership. Basically, Chinas goal of undermining U.S. hegemony in the Asia Pacific
will be stepped up. For example, China will take advantage of Trumps withdrawal
from the TPP to press its Belt and Road Initiative, support globalization, push the
Regional Comprehensive Economic Partnership and oppose protectionism.
Q3. Currently, there is information about deeper cooperation among the US, Korea,
Japan, Australia and India in the security of the Asia Pacific. Do you think this is a
U.S. initiative to contain China?
ANSWER: While there has certainly been some movement to create a coalition of
likeminded democracies to counterbalance China, the devil is in the detail. India
does not want to join the United States in an arrangement aimed at explicitly
containing China. There is debate in Australia whether or not Australia should join
the quad along with the US, Japan, and India.
It is more likely this coalition plus South Korea will have a North Korea focus and less
relevance to the South China Sea.
Q4. Currently, CNN has reported that the White House does not have a clear policy
toward Asia Pacific yet. What is your assessment about this comment?
ANSWER: The U.S. Congress passed a law in 1986 requiring each new Administration
to submit a National Security Strategy (NSS) within 150 days of taking office. No NSS
has been submitted to Congress and insiders tell me a new NSS may be submitted in
the first half of 2018 at the earliest. At the moment U.S. policy is reactive and
overwhelmingly focused on North Korea
Q5. The US has withdrawn from the TPP. It seems like China is attempting to replace
the USs influence in the region (at least in the area of economy) by its financial
initiatives. Could you give your assessment about the possible response of the US
about this likelihood?
ANSWER: China already has a free trade agreement with ASEAN and is pressing
ASEAN to raise this agreement to a higher level. China has also jumped on board to
support the Regional Comprehensive Economic Partnership. Meanwhile, eleven of
the original signatories to the TPP, minus the United States, have just agreed to
continue negotiations. Chinas economic influence is dominant because it is the
largest trading partner of virtually every Southeast Asian state. Now China is pushing
infrastructure development through its Belt and Road Initiative.
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Despite Despite Chinas rise the United States has substantial economic interests in
the region. It is one of the top three trade partners with most countries. U.S.
investment far outweighs that of China. President Trump in his address to the APEC
CEO Summit committed the U.S. to get the World Bank and other financial
institutions to fund infrastructure. So there will be continued China-US completion in
this area. China has the advantage because it had the largest reserve of funds to
commit.
Q6. What do you think is the message President Xi has sent to other leaders in APEC
2017?
ANSWER: President Xi offered a strong contrast to Trumps go it alone approach. Xi
has positioned China as the leader of regional economic integration on a multilateral
basis of course with China at the centre.
Q7. What do you think is thhe message of President Trump has sent to other leaders
in APEC 2017?
ANSWER: Donald Trump has signaled that the United States remains in the economic
game in the Indo-Pacific but on a bilateral basis. Southeast Asian countries, however
dependent they are on China, also need access to the American market. Trump
clearly if indirectly criticized Chinas economic approach to the region, especially the
role of state owned enterprises and the role of its central government. Trump
pressed for private enterprises to play the key role.
Southeast Asian nations will continue to cooperate with China and support the Belt
and Road Initiative and at the same time Southeast Asian nations will also
renegotiate their economic relationship to the United States. The difficulty here, as
Trump Administration officials have revealed, is that the United States lacks
sufficient trade specialists to negotiate too many free trade agreements at the same
time. The bottom line is that regional states cannot count on Trump or the United
States to support regional integration through existing or new multilateral
arrangements such as APEC, RCEP or the TPP 11.

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Thayer Consultancy provides political analysis of current regional security issues and
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