Can India really trust America to stay the course on China?

The India-China rivalry is adversarial, structural, and increasingly resentful. Bilateral ties have reached such a nadir that going against its strategic culture, New Delhi is gradually peeling off its preferred strategic ambiguity to reveal an openly confrontationist posture. As India aligns slowly but surely with the American security orbit and the United States seeks to intensify its partnership with India as a democratic counterbalance to China, one question also needs to be simultaneously explored: can Washington stay the course on Beijing?

This is not an academic question. For India, which still has 50,000 soldiers facing off against Chinese troops in the Himalayas, the only country to take on China’s military, whether its “closest strategic partner” can be trusted to formulate and lead a consistent security strategy against China or whether Washington develops a wobble in face of sustained pressure from Beijing that seeks a reset in terms of engagement — are a matter of concern with crucial policy implications.

The hottest topic of debate in India right now, for instance, is the extent to which China has infiltrated its media organisations and the Left-liberal ecosystem with surreptitious funding and influence operations. The debate has erupted after a report in New York Times linked an Indian media outlet, Newsclick, to a network of global media and think tanks that spread the Chinese Communist Party’s “talking points”, and receive funding from Neville Roy Singham, a far-left American millionaire who enjoys close ties with the Chinese government.

The debate, in which the ruling BJP has targeted the Congress and the CPM for their alleged “dirty nexus” with China, has even reached the Parliament.

Alongside, India is taking part in complex, multi-domain Malabar naval exercises with Quad partners Australia, Japan and the US starting Friday, sending missile corvette to Viet Nam, and warships to Papua New Guinea to support the Philippines. India’s foreign minister is calling out China as the only P5 member to oppose India’s entry into the United Nations Security Council, and India’s former army chief reckons that China’s covert role cannot be ruled out behind the violence in Manipur. India is banning hundreds of Chinese apps, restricting Chinese investments, cracking down on Chinese businesses and seeking to expose CCP’s malicious influence campaigns in domestic politics and the economy.

Inexplicably, this acrimonious relationship has been interpreted as a “détente” by Western media. It takes quite a leap of intellectual faith to see a “détente” amid such mutual hostility, but what may legitimately be called a subtle shift in position, if not an attempted détente, is the Joe Biden administration’s recent approach to China.

The structural issues that prompted the Donald Trump administration to identify China as America’s biggest geopolitical rival still exist, and in fact, have intensified. The Biden administration has continued with and even built on the key tenets of Trump-era policies that were a radical reversal of decades of engagement (which realist thinker JJ Mearsheimer terms ‘strategic blunder’).

America’s deep and open-ended involvement in the continuing conflict in Ukraine, however, seems to have forced Washington into a realization that its critical resources are being spread too thin, and consequently, the Biden administration has embarked on a ‘crisis management’ mode with Beijing to develop some sort of a compact with its strongest rival.

The idea seems to be to open multiple and durable channels of communication with Beijing to diffuse the tension and control the escalatory spiral to put a “floor” under the worsening relationship so that competition does not lapse into a conflict. This may appear to be a sensible course of action, except the policy contours are fuzzy.

First, America’s signalling is inconsistent. If all it seeks is to limit the deterioration of ties to avoid a military conflict, it doesn’t explain why US treasury secretary Janet Yellen went to Beijing, bowed furiously, and told Chinese premier Li Qiang that “we should not allow any disagreement to lead to misunderstandings that needlessly worsen our bilateral economic and financial relationship.”

Second, the “setting a floor” policy, so far, appears to be incumbent on the US unilaterally sending a message that it is not seeking ‘all out rivalry’. This position is difficult to hold in terms of policy, especially when one side is trying to prevent the downward spiral while the other is not pulling an inch back from aggressive posturing.

For instance, amid all this signalling and messaging from the US, China this week released an eight-part documentary about PLA’s preparedness on attacking Taiwan, and it showcased Chinese soldiers pledging to give up their lives if needed to achieve victory over Taiwan.

Driven perhaps by concerns over the dwindling state of arms and munitions stockpile and China’s increasing prowess, especially in the maritime arena the US is doubling down on a diplomatic approach.

Financial Times reported this week that Washington and Beijing are “opening new lines of communication” that involves setting up of three working groups, among which two would be focused on “Asia-Pacific regional issues and maritime issues”, while the third will deal with “broader areas”. According to the report, the first tangible progress towards erecting guardrails for the relationship would also involve a “series of meetings” to “tackle tough issues with clear goals”.

The decision was apparently taken during top Chinese official Yang Tao’s meeting with senior Biden administration officials Daniel Kritenbrink and Sarah Beran in Washington DC on July 31, where both sides “held a candid, substantive, and productive discussion as part of ongoing efforts to maintain open lines of communication and responsibly manage the bilateral relationship,” according to a State Department readout.

A lot seems to have happened during that meeting which points to a perceptible shift in US policy towards reducing geopolitical tension with China. Washington extended a formal invitation to newly appointed Chinese foreign minister Wang Yi. It follows US secretary of state Antony Blinken’s meeting with Wang’s predecessor, the deposed foreign minister Qin Gang, on 18 June, the first time in five years that a top American diplomat has paid a visit to Beijing.

In fact, a quick look at the gamut of recent American engagement with China provides a perspective on the Biden administration’s vigorous engagement efforts.

In May, US national security adviser Jake Sullivan met Wang, now reappointed as the foreign minister, in Vienna for “candid, substantive, and constructive discussions”. It was followed by Blinken’s ice-breaking trip to Beijing for another round of “in-depth discussions” with Wang and president Xi Jinping. The meeting with Xi took place at the Great Hall of the People. The optics were managed in a way to make Xi appear all-powerful, seated at the head of a U-shaped table with Blinken to his right, poised as a keen student listening to his teacher.

The chronology of these engagements is worth noting. The Blinken visit took place after China rejected an American request to let US defence secretary Lloyd Austin meet Chinese defence minister Li Shangfu, who has been sanctioned by the US, on the sidelines of Shangri-La Dialogue in Singapore. Washington wasn’t pleased, but it decided to send Blinken anyway.

In July alone, Blinken again met Wang in Jakarta for yet another round of “candid and constructive discussions”, Yellen travelled to Beijing where she “communicated the concerns of US business community” and Biden’s climate envoy John Kerry arrived to seek climate cooperation. US commerce secretary Gina Raimondo is slated to reach Beijing in August. In between, ‘private citizen’ Henry Kissinger, 100, flew to Beijing and was granted meetings with Li and Xi, which prompted the White House spokesperson to say that “It’s unfortunate that a private citizen can meet with the defence minister and have a communication and the United States can’t.”

It’s not just the air miles. The trips and visits are accompanied by a steady line of messaging. Blinken has gone on every available forum to repeat that “we are working to put some stability into the relationship, to put a floor under the relationship, to make sure that the competition that we’re in doesn’t veer into conflict,” while the Pentagon, keen to open up a direct line of communication with the Chinese military, has said, “escalation management in the Indo-Pacific is so incredibly important, and we would be delighted to have increasing communication channels and connectivity with China.”

While American grand strategy remains on the course of a China-containment strategy — Biden may issue a long-awaited executive order to screen American outbound investments in sensitive technologies to China pretty soon and ask US Congress to fund arms for Taiwan — the China-engagement strategy continues in full gusto.

The fuzzy contours of a simultaneous ‘containment and engagement’ strategy is further complicated by the role played by another key actor in this relationship — the Wall Street. By some measures, the Wall Street remains China’s most trusted and durable ally, and it is starting to irk some American lawmakers. A US congressional committee has launched an investigation into the activities of BlackRock, an American firm that is the world’s largest asset manager, and MSCI, a top stock-market-index compiler, for channeling huge amounts of Americans’ retirement funds into “an array of Chinese companies that operate against the interests of the US,” according to a report in the Wall Street Journal.

Another Wall Street Journal report, filed in 2020, recounted events during the Trump administration when China was trying furiously to avert a trade war in the US, and had in 2018 turned to key Wall Street honchoes — BlackRock CEO Larry Fink, David Solomon, then Goldman Sachs Group’s second-in-command, and JP Morgan Chase & Co’s Jamie Dimon — to aid China’s cause in lieu of lucrative access for the American financial firms into its fast expanding domestic market.

The Wall Street Journal report had added that that “get-together (with then Chinese vice premier Liu He) helped turn Wall Street into one of the biggest cheerleaders for a deal… that was eventually signed in January.” Since the signing of that agreement, “JPMorgan (got) full control of a futures venture in which it had a minority stake. Goldman Sachs and Morgan Stanley became controlling owners of their Chinese securities ventures. Citigroup, meanwhile, won a custodian license to act as a safe keeper of securities held by funds operating in the country” and “BlackRock became the first foreign firm to win preliminary approval to start a wholly owned mutual-fund business in China, a potential admission ticket to a vast market of largely untapped mom-and-pop investors.”

Cut to 2023, and BlackRock employees are among thousands of staff at many state-owned and private-sector companies in China attending lectures on ‘Xi Jinping Thought’.

The links between the Chinese and American economies are too tight and valuable for America — that puts the interests of its financial sector ahead of even sovereign interests — to commit sincerely to a decoupling or even de-risking strategy. The Wall Street giants such as BlackRock have such a powerful hold on mainstream American discourse that their actions rarely draw scrutiny.

In 2021, a New York Times report observed that Wall Street’s bullish attitude on China is sitting oddly with China’s wobbly economic environment. While American the mood of American businesses were souring in tune with the escalating geopolitical tensions, Wall Street honchos were going the other way.

According to the NYT report filed on October 2021, “At the height of a market sell-off in late July, the deputy chairman of China’s securities regulator, Fang Xinghai, summoned executives of BlackRock, Goldman Sachs and other firms to a meeting, trying to alleviate investor nervousness over Beijing’s crackdowns… Some 20 days later, regulators approved BlackRock’s application to offer mutual funds in China.”

Putting together the intense China-engagement strategy adopted by a militarily stretched Biden administration, and deep Wall Street interests whose fate — in view of stulted growth at home and elsewhere — is deeply entwined with China’s, it is anybody’s guess whether the US can remain committed to a containment strategy with Beijing whose end state is an inevitable confrontation with the fate of Taiwan up in the air.

Masahiro Matsumara writes in Nikkei Asia that with the war in “Ukraine consuming vast amounts of US military and financial resources, reflecting a grand misordering of priorities”, “it will take at least five years (for the US) to rebuild the necessary munition stocks and logistics for a potential major regional conflict with China over Taiwan. No wonder the Biden administration is seeking to strike a detente with China.”

It is in this context that the question could be raised in New Delhi. Can America be trusted?

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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