Ten Recommendations on China's Asia-Pacific and Indo-Pacific strategies

From CCG and Fujian Academy of Social Sciences Asia-Pacific Economic Research Institute: Improve Relations with Japan and South Korea, Maintain Openness towards IPEF, etc.

The Center for China and Globalization (CCG) and 福建省社会科学院亚太经济研究所Fujian Academy of Social Sciences Asia-Pacific Economic Research Institute published their joint report 《加强亚太合作，参与印太合作—中国的机遇与挑战》Strengthen Asia-Pacific Cooperation and Participate in Indo-Pacific Cooperation - China’s Opportunities and Challenges on Oct. 23, 2023, during the 8th China Global Think Tank Innovation Forum in Beijing.

Below are a translation of the Ten Recommendations from the report.

(1) Innovate Strategic Thinking and Regional Cooperation Concepts and Develop a Proactive Asia-Pacific Cooperation Strategy.

China's influence and shaping power in the Asia-Pacific regional order is steadily increasing. However, the superior position of the United States as a superpower and China's status as a rising major power bring structural limitations to China's East Asian regional cooperation policy. The strategic dynamics among China, Japan, and ASEAN in East Asia make it difficult for China to lead successfully. While China has made some achievements in bilateral cooperation, its performance in leading multilateral cooperation is subpar, except in the case of the Asian Infrastructure Investment Bank (AIIB), which is a functional cooperation. The institutional innovation in Asia-Pacific regional cooperation is a result of these strategic dynamics. China's Asia-Pacific cooperation policy must pursue proactive and integrative strategies, drawing from the U.S. approach of "integration and transformation." Active participation in regional cooperation negotiations is essential for China to have a say and protect its interests. China should advocate new concepts of regional governance such as "extensive consultation," "joint governance," or "shared benefits," actively integrating into regional cooperation mechanisms led by Japan, ASEAN, and others.

Moreover, China should incorporate the principles of "extensive consultation," "joint contribution," or "shared benefits," into the negotiations and development of various regional cooperation mechanisms. Deepening economic cooperation in East Asia can provide a final consumption market for East Asian economies and lead to a more balanced regional division of labor. China's attempts to lead the East Asia 10+3 FTA negotiations have repeatedly faced setbacks, but its integration into the ASEAN-led RCEP still allows it to achieve its policy goals. China could consider differentiated institutional arrangements, such as exploring non-reciprocal trade arrangements with less developed economies in the region to facilitate their integration into the regional division of labor system.

Discussions could include leveraging early harvest concessions to promote the upgrade negotiations of the China-ASEAN Free Trade Area 3.0, enhancing the level of liberalization in the trade of goods, substantially expanding service trade liberalization, and filling the gaps in digital trade rules. Discussions could also focus on upgrading the East Asian foreign exchange reserve fund ($240 billion, with China and Japan accounting for 32%, South Korea 16%, and ASEAN 20%) under the Chiang Mai Initiative and the ASIAN+3 Macroeconomic Research Office as the basis for establishing a multilateral international organization, forming the "East Asian National Financial and Economic Cooperation Organization" to further develop the East Asian Economic Community.

Additionally, despite being the smallest country in ASEAN, Singapore plays a significant role in promoting ASEAN integration and is the most developed country in ASEAN. With intensifying China-U.S. competition and Asia's growing importance in global economic and political affairs, China could enhance communication and cooperation with Singapore and ASEAN in Asian and international affairs. This would enable Singapore to better serve as a cultural exchange hub between the East and the West, promoting Asia-Pacific economic integration and open and inclusive development, and continuously enhancing Asian cultural soft power.

(2) Value the APEC as a Platform and Further Advance the FTAAP Roadmap.

The Asia-Pacific Economic Cooperation (APEC) is the highest-level, broadest, and most influential economic cooperation mechanism in the Asia-Pacific region. Fully leveraging the positive role of APEC and promoting cooperation among Asia-Pacific countries through APEC meetings, rather than resorting to empty talk or provoking confrontations, should be a goal for APEC nations.

Firstly, China and the United States should increase their cooperation within APEC, avoiding situations like the failure to pass a leaders' declaration at the 2018 Papua New Guinea meeting due to China-U.S. disputes. At the same time, they should agree to expand APEC's discussion topics to include areas such as security.

Secondly, APEC should look to expand its membership, inviting countries like India, Panama, and ASEAN members Cambodia, Laos, and Myanmar, to maintain and strengthen the APEC cooperation platform and extend its lifespan. After all, APEC has been operational for over 30 years with quite mature mechanisms.

Thirdly, enhancing the role of APEC in economic and trade rule-making, and promoting the initiation of FTAAP negotiation processes. FTAAP has been an original intention since APEC's establishment. The United States first proposed the FTAAP negotiation goal in 2006, and the 2010 APEC Yokohama Declaration planned to achieve the FTAAP goal through ASEAN+6 (later RCEP) and TPP.

During the 2014 Beijing APEC meeting, the FTAAP Beijing Roadmap was launched. Currently, there could be a push for China and the U.S. to join the CPTPP as part of the FTAAP negotiations. If China and the U.S. do not join the CPTPP, one option is to support the APEC Business Advisory Council to initiate FTAAP negotiations, starting with areas of greatest consensus and gradually expanding the topics of negotiation. This could include traditional trade topics plus new ones, such as the Asia-Pacific Digital Trade Agreement and the Asia-Pacific Clean Energy Agreement.

Secondly, promoting ASEAN's leading role in advancing FTAAP negotiations is crucial. Although the U.S. Indo-Pacific Economic Framework (IPEF) expresses respect for the central position of ASEAN countries, the geopolitical tensions of the IPEF might undermine ASEAN's core role in the Indo-Pacific region. Thus, to strengthen its central position, ASEAN will likely take on the role of promoting deeper APEC cooperation.

(3) Promptly Initiate and Complete Negotiations for Joining CPTPP and DEPA.

It's crucial to maintain the integration into CPTPP and DEPA as one of the primary pathways for China to promote the FTAAP. Joining the CPTPP and DEPA is significant as it can facilitate China’s market-oriented reform, dispel misunderstandings about its socialist market economy being state capitalism, and effectively counter the negative effects of the IPEF and the United States’ strategic containment.

In the era of the digital economy, the most important resource is data, and countries are competing over rules regarding data resources. Alliances like the U.S.-Japan and EU digital economy have already formed, and China needs to quickly align with international digital rules to increase its say in the international digital economy. The Digital Economy Partnership Agreement (DEPA), initiated by Singapore, New Zealand, and Chile, is a pact China announced joining in 2019. China has formed a DEPA negotiation team and should use DEPA as a basis to promote an Asia-Pacific digital economy agreement covering more APEC members. It is recommended to swiftly form a CPTPP negotiation team. Currently, China faces significant challenges in joining the CPTPP.

On one hand, China needs to continue strengthening its alignment with high-standard economic and trade rules and foster a strong domestic atmosphere supportive of joining the CPTPP. China highly prioritizes joining the CPTPP, having organized multiple think tanks to research it and proposing reform plans for over 2,000 domestic regulations. Pilot tests of high-standard economic and trade rules of the CPTPP are being conducted in free trade zones and Hainan Free Port to achieve higher levels of opening-up.

On the other hand, accelerating the coordination of interests among other stakeholders and mitigating the impact of the United States on the negotiations is crucial. ASEAN and Latin American CPTPP members should be focused on in the negotiations. Considering New Zealand as a mediator to create dialogue mechanisms between China and CPTPP member countries can also be beneficial. Engaging in in-depth dialogues with CPTPP members will help them understand the potential benefits of China’s accession to the CPTPP and recognize China’s determination to further open up by applying to join the CPTPP.

Japan, as an important ally of the United States, and the United States which might use the "poison pill" clause of the USMCA to restrain Canada and Mexico from negotiating with China, potentially significantly hinder China’s entry into the CPTPP. China could leverage Mexico's desire to join the BRICS mechanism to reach a trade and investment liberalization agreement with Mexico.

(4) Deepen the RCEP Cooperation Mechanism to Counter the Challenges and Negative Impacts of the IPEF.

At the regional cooperation level, moderately advancing sub-regional cooperation such as China-Japan-Korea, CAFTA, and the Mekong region is important, with increased emphasis on the role of the RCEP platform. Efforts should be made to upgrade RCEP and achieve greater results, thereby "offsetting" the negative impacts brought by the IPEF. The U.S.-Japan-led Indo-Pacific Economic Framework (IPEF) mainly targets China, and 11 of the 15 RCEP countries have joined the IPEF. The condition for the U.S. to shift its supply chain to these countries is that they must accept "export controls, investment security reviews, and restrictions on technology transfers." Therefore, the IPEF could weaken or even dilute the role of the RCEP mechanism.

In response, it is recommended that:

(1) China should strengthen communication with other RCEP members to promote the prompt establishment of an RCEP Secretariat, providing technical support for the RCEP Joint Committee. Compared to the CPTPP, RCEP not only has lower rule standards but also a looser governance structure. It lacks strict dispute resolution mechanisms like the CPTPP and does not have supervisory committees to enforce its provisions. To stregthen the RCEP cooperation mechanism and regional supply chains, it is crucial to strengthen RCEP’s enforcement and supervision mechanisms and efficiency. An RCEP Secretariat should be established as an executive body to monitor and ensure member countries' compliance with RCEP rules, countering the IPEF's chip alliance (Chip4) and Minerals Security Partnership that overshadow the RCEP agreement.

(2) The Secretariat should conduct research on supply chain cooperation, establish an information-sharing mechanism, explore stable supply chain measures, develop supply chain cooperation standards, and create an open supply chain cooperation. Accelerate cooperation with RCEP countries on "Authorized Economic Operators" mutual recognition, electronic networking of origin, mutual recognition of phytosanitary measures, and regional cumulation rules of origin, using unilateral actions to drive collective actions.

(3) Promote the expansion of APEC membership and new trade topic negotiations. As one of the pathways to realize FTAAP, RCEP should promote the inclusion of Chile, Peru, and Mexico on the Pacific coast, as well as Pacific island nations like Papua New Guinea and Fiji. Jointly with regional economic and trade partners, timely accelerate the implementation or upgrade negotiations of RCEP, especially in deepening economic and trade rules in areas like digital trade, intellectual property, service trade, labor standards, and green energy, to ensure the lasting vitality of RCEP.

(5) Improve Relations with Japan and South Korea, Maintain Smooth Operation of the China-Japan-Korea Trilateral Cooperation Mechanism, and Accelerate the Negotiations for the China-Japan-Korea Free Trade Area.

China, Japan, and South Korea are major global economies, collectively accounting for one-fifth of the world's population and over a quarter of the global GDP, exerting significant economic influence globally. The negotiations for the China-Japan-Korea Free Trade Agreement, initiated in November 2012, have undergone 16 rounds. The successful signing of the RCEP in November 2020 was expected to accelerate the negotiation process, but recent years have seen a noticeable strain in relations between China, Japan, and South Korea, casting a shadow over the negotiations. The RCEP, being the first free trade agreement involving China, Japan, and Korea, provides an integrated institutional framework for economic and trade cooperation among these countries. Moreover, China has formally applied to join the CPTPP, and South Korea has initiated the process to join, creating favorable conditions for high-level economic and trade cooperation based on the RCEP. The official implementation of the RCEP on January 1, 2022, has created new opportunities for deepening economic and trade cooperation among China, Japan, and South Korea.

The improvement in relations between Japan and South Korea in 2023, along with the resumption of high-level talks between the three countries in South Korea on October 26 after nearly four years, signals a potential restart of the trilateral dialogue and cooperation mechanism. Maintaining stable bilateral relations and strengthening trilateral dialogue and cooperation among China, Japan, and South Korea are crucial for regional peace, stability, and advancing the process of economic integration in the Asia-Pacific region.

In the future, efforts should be made to restart the trilateral cooperation mechanism at an early date, progressing from high-level official consultations to ministerial talks and even leaders meetings. Guided by the "Trilateral Cooperation Vision for the Next Decade," and building on the outcomes of the RCEP negotiations, the negotiations for the China-Japan-Korea Free Trade Agreement should be accelerated, aiming to reach a comprehensive, high-quality, mutually beneficial, and valuable agreement. Active exploration of trilateral external cooperation initiatives should be pursued, aligning China's "Belt and Road Initiative," Japan's "Quality Infrastructure Partnership," and South Korea's "New Southern Policy." Continuous advancement of "China-Japan-Korea+X" cooperation should be encouraged, exploring joint projects in areas such as capacity building, poverty reduction, health, and disaster management, to extend the benefits of the tripartite cooperation to other countries and regions.

(6) Maintain an Open Attitude towards the IPEF and Promote its Development towards Freedom and Openness.

The Indo-Pacific region is a crucial part of the United States' global strategy, but it is also the foundational base for China's sustainable development. China has significant strategic interests in the Indo-Pacific region. The Pacific and Indian Oceans are China's most important maritime trade routes and serve as the core hubs of the 21st-century Maritime Silk Road. About 85% of China's energy imports and 60% of its ore imports pass through the Indian Ocean-Pacific shipping lanes. The economic corridor of the Indochina Peninsula, the Pan-Asia Railway construction project, and the interconnected port projects along the Indian Ocean coast are key projects for China's external connectivity. Therefore, establishing a new order in the Indo-Pacific region without China's participation is difficult. The U.S.-Japan Indo-Pacific strategy is clearly aimed at China's growing influence in the region. Excluding China from the Indo-Pacific Economic Framework and security mechanisms is intended to weaken China's influence and erode its strategic interests in the region, naturally meeting strong opposition from China. The focal point of the China-U.S. rivalry is the competition in the ability to unite and divide. China advocates for openness, inclusiveness, and win-win cooperation, opposing the creation of closed and exclusive regional political and economic groups. Based on this, China strongly opposes any Indo-Pacific political and economic groups formed without its participation. Although it's currently unlikely that the U.S. would agree to China's participation, taking a stance as a gesture can position China on a moral high ground. To prevent the Indo-Pacific region from splitting into two parallel supply chains, China can support using the "ASEAN Outlook on Indo- Pacific" as a cooperation framework, and express early interest in participating in the construction and negotiation process of the Indo-Pacific Economic Framework. On one hand, this demonstrates China's commitment to building an open world economy and opposing exclusive political and economic groups, which is significant even as a gesture. Secondly, it can counterbalance the Indo-Pacific strategy to a certain extent. If the U.S. firmly excludes China's participation, it can at least expose the hypocrisy of the U.S. and Japan's declared goals of building a free and open Indo-Pacific region.

(7) Continuously Optimize the Use of Economic Means to Achieve Diplomatic Goals.

Economic diplomacy is a vital way for countries to use economic means to achieve political objectives. The United States excels in incorporating its values and foreign strategies into foreign policies and various bilateral, regional, or multilateral agreements. If the U.S. finds it difficult to implement strategies through multilateral mechanisms, it seeks to establish rules with relevant countries first, then attracts others to join, eventually turning them into international rules. The Indo-Pacific Economic Framework (IPEF) is an example of extending American values and strategic goals into the Indo-Pacific region, setting economic and trade rules and standards for the region.

China can continuously optimize its use of economic means to achieve diplomatic goals:

First, implement the concepts of global or regional governance, such as joint consultation, joint building, and shared benefits, in bilateral or regional economic cooperation partnership agreements, integrating them into investment agreement clauses and economic and technical cooperation terms. Particularly for projects like infrastructure construction that require large investments, slow returns, and carry high risks, international practice often adopts build-operate-transfer or equity cooperation models.

Second, use development aid and open markets to enhance attractiveness to ASEAN and Pacific island countries. For less developed countries in the Asia-Pacific region, China can adopt poverty alleviation strategies, establishing funds like the China-ASEAN Poverty Alleviation Cooperation Fund and the Pacific Island Climate Cooperation Fund, supporting their industries' exports to China.

Regarding the South China Sea disputes, a policy of shelving disputes and joint development can be adopted by keeping the initiative in China's hands, with the precondition for joint development in disputed areas being the joint efforts to exclude the involvement of external forces (third-party powers).

Third, reasonably use economic sanctions. Strong retaliatory measures, including trade sanctions and investment reviews, should be taken against actions that harm China’s sovereignty and interests. In response to the U.S.’s 'small yard, high fence' policy and containment alliances, China can selectively use trade restrictions as countermeasures.

(8) Seek Cooperation with the United States in Areas of Mutual Interest to Promote Bilateral or Multilateral Cooperation, such as Establishing a G3 Mechanism with China, the U.S., and Europe, or Proposing a G4 Mechanism Including Global South Countries.

China and the United States are the world's leading powers, and many global issues are difficult to resolve without their cooperation. Therefore, both the Trump and Biden administrations have emphasized that the China-U.S. relationship encompasses areas of competition, confrontation, and cooperation. At the bilateral level, it's prudent to improve China-U.S. relations, reduce the intensity of rivalry and the extent of 'decoupling,' and flexibly employ strategies of 'struggle and cooperation.' Meanwhile, it's important to improve relations with other countries in the region such as Japan, South Korea, India, Australia, and New Zealand.

Regarding China-U.S. relations, it is recommended that:

First, maintain and strengthen high-level exchanges to accurately convey and understand each other's strategic intentions. Strategic mistrust and a deficit of trust are deep-rooted problems between China and the U.S. Facing American perceptions of China as subverting the existing international order and expanding externally, it's crucial to enhance communication to avoid strategic misjudgments and manage differences through peaceful competition. China's participation in global governance aims to reform existing international mechanisms and rules, making them more just, fair, and inclusive. China pursues an active defense strategy and does not covet an inch of any other country's territory.

Second, maintain and promote cultural and people-to-people exchanges to build positive public perceptions in both countries. Public opinion is a crucial foundation for the healthy development of bilateral relations. The U.S. unilaterally terminating China-U.S. exchange programs hinders cultural and social exchanges and deepening understanding. The demonization of China in the U.S. has severely, negatively impacted American society's perception of China. China needs to strengthen interactions between youths and the general public of both countries to reduce hostility arising from a lack of understanding.

Third, explore common areas of interest and strengthen cooperation to avoid turning competition into conflict. China-U.S. competition can offer more choices for other countries, but unnecessary sacrifices should be avoided. The two countries can strengthen cooperation in areas such as climate change and sustainable development, marine environmental protection, epidemic diseases and healthcare, counter-terrorism, and preventing nuclear proliferation. China is still at the middle and lower ends of the global industrial value chain, with energy consumption per unit of product 1.5 times the global average. External ecological constraints will undoubtedly increase the difficulties and pressures of China's transformation and development. China and the U.S. can engage in substantive cooperation in decarbonization technology and clean energy technology, jointly develop and set technical standards, and provide technical standards and support for less developed countries in the Asia-Pacific region. Cooperate in combating human diseases such as COVID-19, HIV, and cancer, jointly develop and share vaccines, pharmaceuticals, and medical device manufacturing technologies to benefit humanity. Also, cooperate in marine environmental protection and waste and sewage disposal, such as limiting Japan's discharge of water from Fukushima.

Furthermore, in the China-U.S.-Europe triangle, amidst intensifying China-U.S. competition, Europe, with its relative neutrality and influential voice, should be a key target for China's efforts. Strengthening high-level, regular exchanges with Europe, and maintaining cooperation and dialogue on economic and trade cooperation, global governance, climate change, health and hygiene, green energy, and digital economy cooperation is crucial. Proposing a G3 mechanism involving China, the U.S., and Europe can enhance regular high-level exchanges among the three parties and enable the EU to play a better coordinating role between China and the U.S. Simultaneously, in the context of the rise of Global South countries, a G4 concept could be proposed, involving China, the U.S., Europe, and Global South countries, with the rotating chair of the BRICS countries representing the Global South. This could build multilateral interest relations and seek a balanced approach.

(9) Fully Utilize China's Vast Market to Build an Open World Economy and Attract More International Talent for Development in China.

In response to the United States' containment, China's most effective strategy is to open up to the world, build an open world economy, establish closer economic and trade relations with countries in addition to the United States, and compel the U.S. to change its policy towards China. Contrary to the U.S.'s approach of creating a divided world with 'small yards and high walls' and 'decoupling and breaking industrial and supply chains,' China should champion openness, free trade, and mutually beneficial cooperation. In building a new development pattern of dual circulation, leveraging its vast market size, China should aim to attract global resources and elements to its domestic circulation, enhancing the interconnected effects of domestic and international markets and resources, thereby constructing an open world economy. China should deepen reforms, steadily expand institutional openness in areas such as rules, regulations, management, and standards, and build a high-level open economic system. China should insist on promoting deep market reforms through institutional openness, and accelerate the construction of a high-level socialist market economy system.

China's vast market size is a strategic resource for attracting multinational corporations. Multinationals' strategies to respond to uncertainties are generally sales at the production country and production at the sales country, both of which can be fully utilized in China. Therefore, building a unified domestic large market is a strategic measure to stabilize the global supply chain and can effectively counteract the U.S.'s decoupling strategy of 'de-China-fication.' Additionally, in the face of challenges such as the loss of international talent during the pandemic and the deterioration of Western public opinion towards China, in the post-pandemic era, China needs to strengthen its international communication efforts, continuously enhance its international influence and attractiveness, and accelerate the development of a major global talent center and innovation hub. Talent is a crucial strategic resource in the 21st century. Amid intensifying global competition for talent, China should 'gather talents from all over the world and utilize them,' advance the optimization of relevant policies, regulations, and supporting facilities, attract more high-level international talents to develop in China to provide human resources support for building an open world economy.

(10) Conduct Public Diplomacy and Utilize Cultural Exchanges as a Bridge and Platform to Enhance Mutual Trust, Friendship, Solidarity, and Cooperation among Asia-Pacific Countries.

Cultural exchange is an important cornerstone and lubricant in international relations, playing an increasingly vital role, especially in tense international situations. It is becoming a new stabilizer for world peace and stability. General Secretary Xi Jinping has repeatedly emphasized that political trust, economic and trade cooperation, and cultural exchange together form the three pillars of China's foreign relations development. Cultural exchanges can enhance mutual understanding and friendship among people from different civilizations and cultures, thereby building bridges and bonds of mutual trust and cooperation between different civilizations.

Against the changes unseen in a century, Asia-Pacific countries face many common issues and similar challenges. Public diplomacy can be conducted, encouraging academia, the business community, think tanks, industry associations, NGOs, and others in China to enhance communication, exchanges, and mutually beneficial cooperation with Asia-Pacific countries' diplomatic missions in China, international organizations, foreign chambers of commerce, and multinational corporations. The strategies of "going global" and "bringing in investment" should be pursued to enhance cultural interactions, trust, and cooperation among Asia-Pacific countries.

Recommendations include:

First, support exchanges and cooperation among think tanks, provide greater freedom and convenience for think tank cooperation, leverage think tanks' roles in advancing regional cooperation as platforms and intellectual supports, encourage active participation in international conferences, create international exchange platforms, and enhance international discourse and agenda-setting capabilities.

Second, support international schools "going global," establish overseas Chinese language schools in Asia-Pacific countries, fully utilize the advantages of overseas Chinese resources, so as to enhance Sino-foreign cultural exchange and mutual learning, and cultivate international talent who is knowledgeable and friendly towards China.

Third, develop both outbound and inbound study programs, support Chinese students studying abroad, and attract more students from Asia-Pacific countries to study in China.

Fourth, vigorously develop inbound tourism, introduce more tourism products and services that are popular with tourists from Asia-Pacific countries, and strengthen overseas market promotion and targeted marketing.