Understanding the Implications of 'The Avoidable War' and 'The Changing World Order'

Both authors, Kevin Rudd and Ray Dalio, offer valuable perspectives on the looming threat of conflict between China and the US, drawing from their extensive experiences within Chinese political and business circles.

Rudd has been immersed in Chinese politics for four decades, being one of the few Western leaders fluent in Mandarin. He currently serves as the CEO and president of the Asia Society Policy Institute. Conversely, Dalio has spent years engaging with Chinese enterprises as the head of the world’s largest global macro hedge fund since the opening of China's capital markets over the last thirty years.

Their works aim to provide Western audiences with insights into the mindset of Chinese policymakers, facilitating a better understanding of Chinese culture and offering a different perspective on Western attitudes.

While Rudd sees a war between the two nations as a "possibility rather than a probability," he refers to the current decade as "The Decade of Living Dangerously," noting a shift in rhetoric from both nations towards the likelihood of armed conflict.

Ray Dalio highlights concerns regarding Taiwan, stating, "Probably the most dangerous sovereignty issue is Taiwan… I would worry a lot if we were to see an emerging fight over sovereignty, especially if we were to see a Fourth Taiwan Strait Crisis."

It is crucial to note that both texts were penned before Russia's invasion of Ukraine and the emerging crisis in Taiwan. Dalio has recently noted in his newsletter that the tensions surrounding Taiwan are following the path outlined in his book.

This review will primarily focus on the escalating tensions involving Taiwan, as highlighted by both authors, while touching on the other significant themes addressed in their works.

The Historical Context: 1839-Present

#### China’s Century of Humiliation

Both Rudd and Dalio trace the current geopolitical landscape back to the 'Century of Humiliation,' which began with the Opium Wars against Britain in 1839 and concluded with Japan's invasion during World War II.

During this period, Britain, the dominant superpower at the time, imposed trade conditions on China, which was reluctant to accept British goods in return for its superior products. Instead, China demanded silver, leading Britain to resort to smuggling opium, resulting in widespread addiction and economic decline.

In response to the opium crisis, the Qing Dynasty banned the trade, prompting Britain to wage war, resulting in a series of treaties that opened Chinese ports to foreign trade and ceded significant territories, including Taiwan to Japan.

The first Sino-Japanese War in 1894 marked Japan's ascendance and the decline of the Qing Dynasty. The Century of Humiliation culminated in the brutal Japanese invasion during World War II, a betrayal of China's trust in the US and its allies, who failed to provide support as promised.

This historical context led to a profound disillusionment in China regarding Western ideals and a prolonged period of geopolitical isolation following Mao's Agricultural Revolution, which caused immense suffering akin to foreign invasions.

Dalio notes Mao's alignment with Marxism/Leninism as a response to Western capitalism, which had devastated China.

#### The Military Tradition of China

China's military history reveals minimal engagement in infantry combat over the centuries, aside from a few border skirmishes. The last major dynasty, the Qing, experienced significant defeats.

Traditionally, Chinese dynasties employed a tributary system that relied on soft power and trade to establish dependencies among neighboring states without direct military intervention.

Sun Tzu’s The Art of War continues to influence Chinese military and foreign policy, with Rudd suggesting that the Belt and Road Initiative (BRI) reflects Tzu's strategic principles in attracting developing nations.

Ten Critical Issues to Monitor

Deteriorating Diplomatic Relations: The relationship between China and the US has significantly worsened post-COVID-19, particularly under Biden, who has continued Trump's stringent policies. Rudd has suggested that the era of strategic engagement is over.
One China Policy: Xi Jinping's commitment to reunifying Taiwan with China is more pronounced than previous leaders, invoking nationalistic sentiments to reclaim lost territories.
Made in China 2025: This initiative aims to elevate China's manufacturing capabilities, focusing on cutting-edge technologies, including AI and 5G, to enhance its global economic standing.
Xi Jinping Thought: Enshrined in the CCP's constitution, this ideology reinforces the party's control and Xi's consolidation of power, marking a shift towards a more autocratic governance style.
Digital Governance: The battle for digital dominance is emerging, with China developing a new internet protocol that contrasts sharply with the existing open standards.
Belt and Road Initiative Success: Despite concerns about project delays, the BRI has successfully integrated numerous countries into China's economic framework, challenging Western influence.
Economic Control: Xi is pivoting China's economy back to state control, leading to tensions between public and private sectors, particularly in the real estate market.
Military Expansion: China's military buildup mirrors historical patterns seen before World War I, with a shift from defensive to offensive capabilities.
Stalemate of Pride: The US and China are unlikely to back down from confrontation due to the perceived loss of face that would ensue, particularly regarding Taiwan.
Ideological Clash: The tensions stem from contrasting governance philosophies—America's individualism versus China's collectivism, framing a broader struggle between democracy and autocracy.

Conclusion

Xi is focusing on three key outcomes to solidify his power ahead of the 2024 Party election: sustaining economic strength, reclaiming Taiwan, and maintaining face in the event of armed conflict with the US.

There remains potential for "managed strategic competition" to foster cooperation between the two nations. As Dalio notes, the US and China are already entangled in a currency and technology war, a dynamic that will shape future global relations.

Andrew Gillick Thanks for engaging with my analysis on the future of governance and finance! I work as a technical writer and business analyst for fintech companies. If you found this insightful, consider subscribing to my Future Perspectives Newsletter for insights into a cashless future.

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