George W. Bush’s post-9/11 East Asia policy: enabling China’s contemporary assertiveness

Abstract

It is commonly argued that China’s foreign policy and behaviour have become increasingly assertive since Xi Jinping took the reins of the Chinese Communist Party (CCP). This strategic transformation is seen as paving the way for a direct confrontation between China and the USA since the Trump presidency. Drawing on the logic of international order-building, however, this article argues that the groundwork for this strategic change was laid when Hu Jintao was leading the CCP and that what made it possible was George W. Bush’s China and East Asia policy after 9/11. Bush’s subsequent reduced interest in East Asia enabled China to fill the void left by an absence of US presence and influence in the region. This article asserts that American policy-makers may need to ponder what their order-building project to weaken and exclude an illiberal China should include.

Introduction

It is commonly argued in post-2012 literature that China’s foreign policy and behaviour have become increasingly assertive¹ and truculent, especially over maritime territorial disputes with neighbouring countries, since November 2012 when Xi Jinping took the reins of the Chinese Communist Party (CCP) (Deng 2014; Yan 2014; Sørensen 2015; Chang-Liao 2016; Poh and Li 2017). Under Xi’s leadership, according to this narrative, China began to give up the first part of the late Deng Xiaoping’s prescription for its foreign policy strategy, enunciated in 1990, namely ‘taoguang yanghui’ (keeping a low profile), while shifting to implement the latter part of Deng’s dictum, ‘yousuo zuowei’ (trying to achieve something) in order to realise Xi’s ‘Chinese dream’ as well as national rejuvenation.² According to this line of argument, this strategic transformation has set in motion a direct confrontation between China and the USA since the Trump presidency of 2017–2021, with the ‘trade war’ between the two states being the most obvious indicator.³

Contrary to this received understanding of the turning point in China’s grand strategy, this article argues that the groundwork for this strategic change was laid when Hu Jintao was leading the CCP in 2002–2012⁴ and that what made it possible was the George W. Bush (hereafter referred to as Bush) administration’s China and East Asia policy after 9/11.⁵ Bush’s preoccupation with his ‘Global War on Terror’ (GWOT), in particular the Iraq War which commenced in March 2003, necessitated his re-definition of China from a ‘strategic competitor’ to a (potential) ‘responsible stakeholder’ in world affairs which is willing to cooperate with the USA in global governance (Zoellick 2005). The two countries also shared concerns over Islamic terrorism. As elaborated further below, this reorientation was shaped by the logic behind US international order-building. Bush’s interest in improving ties with China and disinterest in East Asia combined to enable China to fill the void left by an absence of US presence and influence in East Asia.⁶ China was handed both time and geopolitical space to focus on spurring domestic economic growth based on state capitalism and to use increasing economic clout to compete with the USA in the Asia–Pacific region. This transformed the regional order from a US-dominated single hierarchy since the 1951 San Francisco Peace Conference, in which the USA was deemed to be the indispensable hegemonic power in both military and economic areas, into what John Ikenberry (2016) has termed a ‘dual hierarchy’ in which the economic aspect is dominated by China whereas the USA only manages to maintain military dominance. Likewise, Zeno Leoni argues that American grand strategy since the end of World War II has sought to achieve a strategic synthesis of two interlocked interests, namely ‘enforcing global geoeconomic openness while maintaining national geopolitical primacy’ (Leoni 2021, 50). However, the rise of China has made the attainment of this strategic synthesis increasingly difficult because US power is being undermined by the growth of China’s state capitalism (Leoni 2021, 51). This order transformation or transition provided the material conditions for China to flex its muscles once Xi, Hu’s successor, had consolidated power. With belief in the assumptions of the liberal commercial or capitalist peace theory (Campbell and Ratner 2018), US officials were slow to respond to this strategic challenge. It did not happen until 2011, ten years after 9/11 and the year of US formal troop withdrawal from the Iraq War, when President Barack Obama announced his strategic rebalance to Asia (Schuman 2022).⁷

This article looks at how Bush’s handling of 9/11 impacted on the emergence of China’s assertive foreign policy under Hu Jintao and Xi Jinping from the angle of international order construction. First, this paper posits that international order is a hierarchical political formation crafted by the dominant actor or hegemon (Musgrave and Nexon 2018, 593, 595, Heritage and Lee 2020, 6). Second, as English School International Relations scholars have suggested, order itself has a ‘purposive’ sense or connotation (Vincent 1974, 328, Bull 1977/2002, 4). Unlike the English School, however, this article contends that the primary motive for order-building for the dominant actor is not to facilitate international cooperation to achieve some common primary goals but to weaken and exclude threatening entities (a rival state and an adversarial ideology) so that the new geopolitical space is congenial to the security and development of the hegemon. To put it differently, international ordering is an act of exclusion by the hegemon (Lascurettes 2020).⁸ A ‘Cold War project’ that aimed to weaken and exclude communist states and ideology was given a prominent position in post-1945 US-led liberal international order-building, especially in Europe (primarily West Germany) and East Asia (primarily Japan) (Ikenberry 2020). This order-building and order-maintaining strategy has encouraged or forced other countries to adopt ‘competitive capitalism’. Even though Germany and Japan had once posed challenges to US technological leadership in the 1980s, the USA managed to contain their challenges because of their loss of geostrategic aspirations at the end of World War II. But for American leaders this is not the case of China, which harbours both militarily revisionist and state-capitalist ambitions (Leoni 2021, 75–76). That may help explain why a main objective of the Indo-Pacific strategy outlined in the Trump administration’s ‘US Strategic Framework for the Indo-Pacific’, declassified in January 2021, was to prevent ‘China from establishing new, illiberal spheres of influence’.⁹ By the same logic, China wants to construct in its environs its own sphere of influence by weakening and excluding the USA and the ideology associated with liberal international order, which espouses, inter alia, political freedom, reduced state intervention in the economy and a market economy based on private entrepreneurship.¹⁰ Third, as shown below, China’s ordering project is built on a state-led capitalist ideology and practices whereby it utilises state capitalism and state-owned enterprises to boost domestic economic growth and employs coercive economic statecraft to oppose and exclude those deemed to imperil China’s security and regional dominance.

This article proceeds in three steps. It starts from an outline of the logic of American order-building before and after 9/11, focusing on the transition from Clinton to Bush in their dealings with China and East Asia. This is followed by an illustration of the significant changes in Bush’s China policy after 9/11, and then a discussion of American ‘absenteeism’ in East Asia after the terrorist attacks in the third section. It concludes by suggesting that American policy-makers may need to ponder how and why their past China engagement policy has not worked to transform China into a benign rising power, and what their order-building project to weaken and exclude an illiberal China should include.

The logic of US order-building: before and after 9/11

In the heyday of US unipolarity after the end of the Cold War, the Clinton administration (1993–2001) was likely the only presidency since 1945 that did not try to weaken and exclude threatening entities, because it perceived few imminent threats to the USA on the horizon. Clinton’s order-building strategy was therefore more expansionist and less restrained and he championed the US model of capitalism by ‘enlarging the liberal order geographically and deepening it functionally’ (Mastanduno 2011, 165). With this expansionist strategy, the Clinton administration had initially wanted to use the US material advantages of unipolarity to ostracise and contain the remaining menacing force of Chinese communism from East Asia by applying economic pressure—via, among other steps, the annual renewal of China’s most-favoured-nation (MFN) status—on the Chinese communist regime (Christensen 2015, 180–181).¹¹ With few tangible successes (Mann 1999, 292–314), however, Clinton from 1994 began to change the approach to one that placed a premium on engaging China in the hope that it could be politically transformed by the liberal economic forces unleashed by its own economic reforms and globalisation, and thus integrated into the liberal international order (Johnston 2019, 104–107, Ikenberry 2020, 263). The Third Taiwan Strait Crisis of 1995–1996 was a more pivotal turning point.¹² Although the USA eventually managed to defuse the crisis by deploying overwhelming military force near the Taiwan Strait, the two countries were poised on the brink of a military slowdown. Until the summer of 1995 when Lee Teng-hui visited the USA, China had not often been at the top of the foreign-policy agenda of the Clinton administration (Mann 1999, 329). The military crisis took place in the context of the 1996 US presidential election year when Clinton went to great pains to prevent a military confrontation with China. His previous ‘ambivalence’ about the relationship he would like to forge with China was effectively resolved. This set him firmly to pursue engagement with rather than exclusion of China (Gellman 1998). In July 1996 Anthony Lake, Clinton’s national security advisor, visited China; he asserted that the Administration was seeking to avoid confrontation with China (Mann 1999, 343). This new approach had brought Chinese President Jiang Zemin to visit the USA in October 1997 and Clinton to visit China in return in June-July 1998. In Shanghai Clinton offered China a concession it had sought for; he for the first time announced publicly, albeit not in writing, the ‘three no’s’ policy: “we don’t support independence for Taiwan, or ‘two Chinas’, or ‘one Taiwan, one China’; and we don’t believe that Taiwan should be a member in any organisation for which statehood is a requirement” (Embassy of the People's Republic of China in the United States of America 1998). Overcoming the hurdles to forging a bilateral deal in April–May 1999, China and the USA in November reached an agreement on China’s accession to the World Trade Organisation (WTO), to which it was eventually admitted on 11 December 2001, exactly three months after 9/11 (Fewsmith 1999).

During his 2000 presidential campaign Bush described China as a ‘strategic competitor’ rather than a ‘strategic partner’ (Baum 2001). To challenge Clinton’s China policy, two pro-Republican conservative think tanks, the Heritage Foundation and the Project for the New American Century, issued a joint statement on the defence of Taiwan in August 1999. It criticised the Clinton administration for “pressur[ing] Taipei to cede its sovereignty and to adopt Beijing’s understanding of ‘One China’” and argued for an end to a US policy of ‘strategic ambiguity’ and for the USA ‘declar[ing] unambiguously that it would come to Taiwan’s defence in the event of an attack or a blockade against Taiwan’.¹³ Among the 23 signatories to the statement were Richard Armitage and Paul Wolfowitz, who would, respectively, serve as Deputy Secretary of State and Deputy Secretary of Defense in the Bush administration in 2001–2005 (Mann 2004, 243). Following his election in 2000, Bush initially envisioned an international order that would confront and exclude an illiberal China. In April 2001 after the EP-3 mid-air collision,¹⁴ his Administration ordered all American officials to avoid ‘all but the most essential contacts’ with their Chinese counterparts in the US capital and elsewhere (Sutter 2003, 485). In the same month he enraged China further by pledging that if Taiwan came under attack, he would order ‘whatever it took’ to help the island to defend itself (Sanger 2001; Mann 2004, 285). Since 1979, when the USA terminated formal relations with Taiwan (officially speaking, the Republic of China), no American president had ever delivered such a blunt and firm statement in support of Taiwan’s defence against China. This happened in the context of the election of Chen Shui-bian, Taiwan’s Democratic Progressive Party’s candidate, as the president in March 2000, a clear demonstration of the consolidation of a multiparty democracy in Taiwan. Many Republicans thus expected that the Bush administration would modify US policy towards Taiwan (Hickey 2004, 463). In May 2001 Chen was allowed to visit New York on a stopover to his trip to Central America and to meet New York City Mayor Rudolph Giuliani. This was the result of the Bush administration’s relaxation of the scope of ‘acceptable’ contacts with Taiwan’s senior officials (Hickey 2004, 471). The Pentagon was, in particular, eager to strengthen military ties with Taiwan. A US–Taiwan Defense Summit, organised by the US–Taiwan Business Council, was held in St. Petersburg, Florida in March 2002. Tang Yiau-ming, Taiwan’s Minister for National Defence, was invited to that ‘private’ meeting where he met Wolfowitz to discuss matters of military cooperation (Hickey 2004, 467–468).

However, in the wake of the watershed event of 9/11, Leoni notes, ‘the amount of military and financial resources invested in the War on Terror did not allow for a pivot to Asia’ (Leoni 2021, 80).¹⁵ This paper goes further by arguing that the non-commitment of military and financial resources to Asia was not only a matter of resource distribution but also because the Bush administration’s order-building focus shifted to targeting rogue states, especially Iraq, Islamist radicalism and terrorism. The president and his neoconservative aides perceived threats based on a combination of ‘radicalism and technology’, with the latter being referred to as weapons of mass destruction (WMD). They identified three threat agents (or a ‘trinity of evil’): terrorist organisations, ‘tyrannical’ leaders of weak or rogue states, and WMD technology (Record 2003, 4–5, Daalder and Lindsay 2005, 119). Weak states, such as Afghanistan under the theocratic dictatorship of the Taliban, harboured al-Qaeda terrorists, allowing them to establish and expand their influence outwards. Rogue states like Iraq under Saddam Hussein not only had dismal human rights records but also were seen as being determined to acquire the technology of WMD and might share this with terrorists. Pre-emptive/preventive strikes would be needed (Record 2003, 5, 6, Daalder and Lindsay 2005, 120, Schmidt and Williams 2008, 197). As a result of this reorientation, Bush’s order-building goal was to oppose and exclude hostile Middle Eastern dictatorships, starting from the GWOT in Afghanistan and Iraq. Regime change in Iraq was indeed seen as part of a broader movement to democratise the Islamic world in the Middle East, which was in turn deemed to be crucial to counterterrorism (Bush 2003, Halper and Clarke 2004, 148, 155–156, 218, Smith 2017, 240–249). In short, international security was seen by the Bush administration through the lens of ‘undeterrable’, ‘unpredictable’ and ‘irrational’, albeit militarily inferior, rogue states, and homeland security (Martin 2007, 81, 90, Homolar 2010, 720).¹⁶ Consequently, the Department of Homeland Security was established in 2002. Radical Islamist terrorists and their ideology and weak and rogue states were all now perceived to be more threatening than China to the security and primacy of the USA (Funabashi 2007, 306–307). More importantly, for the neoconservatives, there was a perceived military solution to these threats (Mann 2004, 346).

The direct result of this change in the objectives of US international order-building project was not only a warming of US–China relations and continuation of economic engagement with China,¹⁷ which was already developing under Clinton, but more detrimentally a disengagement with allies of the USA and other states in East Asia. To the dismay of smaller Southeast Asian states, Bush’s absenteeism was most obvious during his second term (2005–2009). Months after assuming the position of Secretary of State in January 2005, Condoleezza Rice was absent from the Association of Southeast Asian Nations (ASEAN) Regional Forum (ARF) meeting that August (Dillon 2005). In May 2007, the Bush administration announced that the president would visit Singapore in September to attend an ASEAN-US summit to commemorate the thirtieth anniversary of their relations. However, in July it was announced that he would skip the visit because of the need to address the military campaign in Iraq, and the meeting with ASEAN leaders would be rescheduled ‘for a later date’ (Guan 2019). It was indeed cancelled; the inaugural ASEAN-US summit was not held until after Barack Obama entered the White House, taking place in November 2009 in Singapore. Compounding this feeling of marginalisation on the part of ASEAN members was Rice’s decision to be absent from the ARF meeting again in August 2007, because of developments in the Middle East. Rice’s absence was said to be a ‘dampener’ (Ruwitch 2007; Guan 2019). The previous bilateral US–Taiwan drive to upgrade their relations, as argued by Hickey (2004, 74), also hit a ‘glass ceiling’.¹⁸

The aftermath of Bush’s post-9/11 China/East Asia policies was twofold. First, it helped give China a benign external environment, to which membership of the WTO also contributed, to attract foreign direct investment and concentrate on its economic development. Second, the relative absence of the USA gave rise to a void in the geopolitical space in East Asia, enabling China to establish its foothold and create a sphere of influence in the region. Aided by its rapid economic growth, as shown below, China soon began to form the principal market for exports from all regional states, which subsequently relied less on American domestic markets for their economic growth. With increased hard power, on the other hand, China’s foreign behaviour began to become more assertive, especially after the global financial crisis of 2007–2008, over territorial disputes with Japan (Manicom 2014) and in Southeast Asia (Heritage and Lee 2020). In the following sections, the Bush administration’s policy towards China and East Asia will be discussed in more detail.

Bush’s China policy: enabling the rise of a dual hierarchy in the Asia–Pacific

Two hours after then-Chinese leader Jiang Zemin learned of the 9/11 attacks, he allegedly telephoned Bush to express his condolences and China’s determination to fight against terrorism alongside the USA (Funabashi 2007, 266–267). Wishing to utilise the 9/11 events to improve relations with the USA, Jiang dispatched Wang Yi, who would later become foreign minister in 2013, to Pakistan to ‘nudge’ President Pervez Musharraf into cooperating with the USA in dealing with the Taliban, with which Pakistan’s Inter-Services Intelligence (ISI) allegedly had had strong links (Christensen 2015, 206). The political support was not wholly one-sided. The Bush administration reciprocated with designating the East Turkistan Independence Movement (ETIM), a Muslim separatist group founded by Hasan Mahsum, a Uyghur from Xinjiang, as a terrorist group under Executive Order 13224 in September 2002.¹⁹ The US government felt sympathy for its Chinese counterpart after some Uyghur ‘terrorists’ were found by American troops in Pakistan and Afghanistan (Turner 2014, 139). The Chinese government has always claimed that ETIM established links with al-Qaeda and the Taliban and pressed the USA to take punitive actions against the ‘terrorist group’. After 9/11 China began to intensify its campaign against ‘terrorists’ in Xinjiang (Trédaniel and Lee 2018).

With China on board with the emerging US counterterrorism campaign, the USA began to improve relations with it markedly, as shown in Bush’s new narrative and the frequency of mutual visits by senior leaders in 2001–2009. No longer framing China as a ‘strategic competitor’, the president instead praised China as ‘an emerging marvel’ and the ‘most important country’ in the Asia–Pacific (Hickey 2004, 472). Shortly after 9/11, Bush visited Shanghai for the Asia–Pacific Economic Cooperation (APEC) summit meeting in October 2001 without going to any other neighbouring country,²⁰ and he re-visited China in February 2002. Hu Jintao, then vice-president and heir-apparent, was invited to visit the USA in April–May 2002. Jiang Zemin paid a reciprocal visit to the USA to hold a working summit with Bush at Crawford Ranch in October of that year. Chinese Premier Wen Jiabao also visited the USA in December 2003. During Bush’s second term (2005–2009), Hu Jintao met with the president on the sidelines of the United Nations summit meeting in September 2005. Bush visited China again in November. Hu visited the USA as head of state in April 2006. In August 2008 Bush went to Beijing to attend the opening ceremony of the Olympic Games.²¹ Hu Jintao visited Washington, DC, in November 2008 to attend the G-20 summit.

After 9/11 Bush was also seen to tilt in favour of Beijing in dealing with Taiwan. Partly due to its preoccupation with the GWOT, the Bush administration was concerned that Chen Shui-bian’s pro-independence initiatives, if uncurbed, would endanger American interest by risking US military confrontation with China (Sutter 2006).²² In meeting visiting Chinese Premier Wen, Bush voiced his strong opposition to Chen’s proposal to hold a referendum in Taiwan in March 2004, which was seen by Beijing as a move towards formal independence. In response, Wen said the Chinese ‘very much appreciate[d]’ Bush’s stance on Taiwan (Knowlton 2003). Taiwan’s requests for buying new F-16C/D fighters from 2006 were also rejected by the Bush administration (Kan 2014, 20–21).

According to Thomas Christensen, a former Bush administration official,²³ the president’s early treatment of China as a ‘strategic competitor’ was a ‘flawed approach’, which was quickly dismissed after 9/11 (Christensen 2009, 102). Subsequently, his Administration’s policy became not to contain China, but to ‘encourage Beijing to seek increased influence through diplomatic and economic interactions rather than coercion, and to use that increased influence in a manner that improves the prospects for security and economic prosperity in Asia and around the world’ (Christensen 2009, 89). That is why Deputy Secretary of State Robert Zoellick, in a well-publicised address in September 2005, exhorted China to act as a ‘responsible stakeholder’ in the international system (Zoellick 2005).

Why was containment not adopted? A containment policy would likely have produced negative outcomes for two major reasons. The USA would likely not have had any followers for this confrontational approach in the Asia–Pacific region. Few countries there would cooperate with the USA to enforce a full-blown policy of containing China. Second, a containment policy would only bolster the voice of the hawks in Beijing who had often claimed that the USA harboured a hostile intention to block the rise of China (Christensen 2009, 91–92). Instead, the Bush administration tried to shape China’s choices by a two-prong strategy: a continuing military presence in Asia to discourage China from using coercion to resolve disputes with neighbouring countries; and active diplomatic engagement with China to encourage it to seek influence through constructive economic and diplomatic means. As a stakeholder in the process, Christensen praised Bush’s diplomatic approach for fostering positive evolution in China’s foreign relations and policy. Examples included China’s cooperation on North Korea, Sudan, Myanmar and Iran. In August 2002, China agreed to restrict the export of missile technology to North Korea, Iraq, Iran, Libya and Syria, which the USA had accused of assisting terrorists (Dao 2002). There was increased US–China coordination and Chinese leadership in North Korean denuclearisation diplomacy since the inception of the Six-Party Talks in 2003 (which we shall return to below). China shifted its policy towards the humanitarian disaster in Darfur, Sudan, in 2003, by demonstrating a softened adherence to its principle of non-interference in the domestic affairs of a sovereign state. China was also a party to the P5 + 1 (the UN Security Council’s five permanent members plus Germany) process with regard to controlling the alleged Iranian nuclear weapons programme which commenced in 2006, although Chinese oil companies still pursued lucrative commercial deals with their Iranian counterparts (Christensen 2009, 93–96).²⁴

On the economic front, according to Christensen, the Bush administration adopted a ‘very smart’ approach to economic affairs, arguing that US ‘prescriptions’ would not only be good for the USA but also equally beneficial to China in sustaining its economic growth over the years. A developing bilateral trade deficit—later to become a major source of rancour during the Trump administration—was not a structural issue but particularly due to ‘certain problematic Chinese practices’ in currency, export subsidies and non-protection of intellectual property rights (IPR) (Christensen 2009, 96–97).

Did Bush lose China?

Was the Bush policy towards China effective in shaping its choices to the liking and in the interests of the US? Or did Bush ultimately ‘lose China’, as claimed by Paul Blustein who argues that ‘it was under the Bush administration’s watch that economic relations between the two powers began to go badly awry’ (Blustein 2019)? In 2003 China under Hu Jintao and Wen Jiabao quietly adopted a new model of economic development, commonly known as ‘state capitalism’, whereby state intervention in the economy became more pervasive than under the preceding Jiang Zemin/Zhu Rongji leadership. As the Chinese economy has been dominated by state-owned enterprises, economic interdependence between China and the world has enabled China to employ economic statecraft, including economic coercion, to pursue and achieve political goals.

In its 2007 Report to Congress, the US–China Economic and Security Review Commission (USCC) noted that China’s economic reforms were not based on traditional ‘free-market’ principles, but instead on a ‘government-directed industrial policy’ to promote some favoured sectors as well as export-led growth (US-China Economic and Security Review Commission 2007, 56). It also held that in the mid-2000s the Chinese government had reversed the policy of economic liberalisation and the state had reasserted its control over the economy (US-China Economic and Security Review Commission 2011, 48).²⁵ As a key institution of state capitalism, the State-Owned Assets Supervision and Administration Commission (SASAC) was set up in March 2003, under the central government, to manage centrally owned enterprises, i.e. the largest businesses in the country (the ‘national champions’). As ‘the world’s largest controlling shareholder’, SASAC manages the ‘national champions’ with the power to appoint (or dismiss) senior executives and approve mergers and acquisitions. Its remit includes improving the image of Chinese state capitalism and state-owned enterprises (SOEs) domestically and abroad (Lin and Milhaupt 2013, 734–746). Also established at the same time as SASAC was the National Development and Reform Commission (NDRC), which was transformed from the previous State Planning Commission (1952–1998) and State Development Planning Commission (1998–2003). The prices of major commodities, including electricity, oil, natural gas and water, are set by the NDRC. SASAC and the central government in December 2006 designated seven ‘strategic industries’ and five ‘heavyweight industries’. The state would maintain ‘absolute control’ over the former via its SOEs while the state’s ‘heavy’ involvement in the latter would also remain (US-China Economic and Security Review Commission 2007, 38–39).

The industrial policy tools employed by China’s state capitalism to nurture its SOEs and develop its economy rapidly are not what ‘competitive capitalism’ espouses: low-interest loans, debt forgiveness, privileged access to credit, undervaluation of the Chinese currency,²⁶ forced technology transfer and the requirement of equipment localisation or local content (US-China Economic and Security Review Commission 2007, 47, Blustein 2019). These resulted in what David Autor et al. have called the ‘China Shock’ effect (Autor et al. 2016). The US manufacturing sector has subsequently lost blue-collar jobs to China while China was becoming the ‘world’s factory’—China becoming an integral part of global supply chains—as well as the major trading partner of many countries, including key allies of the USA in the Asia–Pacific, which jumped on the Chinese bandwagon. In 2003 China displaced the USA as South Korea’s top trading partner while South Korean businesses moved their labour-intensive production lines to China. In the following year China became for the first time Japan’s top trading partner, surpassing the USA, when major Japanese companies also used China as the production base for their products (Zaun 2005; Congressional Research Service 2006). China became Australia’s largest trading partner in 2007 and its top export market in 2009 (Australian Embassy in China No date).

The global financial crisis convinced Chinese leaders that state-led development is required to defend the national economy of a late developer from the natural excesses of free markets (McNally 2012, 750, 768). As a step to lessen its reliance on the international monetary system dominated by the US dollar, China began in 2009 to internationalise its currency, the renminbi yuan, by encouraging its use in China’s international trade and transactions, although the country’s capital account has still been subject to tight regulation (McNally 2012, 757–764, McNally 2020, 289–294). The Belt and Road Initiative (BRI), the signature project of Xi Jinping, can be understood as a ‘state-mobilised globalisation’ of Chinese capitalism (Ye 2020). Not only promoting trade between China and the world, the BRI expedites the globalisation of Chinese capital to almost all countries as well as Chinese state capitalism to developing countries which also would like to ‘move away from the precepts of Anglo-American capitalism’ in the wake of the global financial crisis (McNally 2012, 768).

Over the years, this Chinese state capitalism has given rise to what might be termed a ‘dual hierarchy’ in the Asia–Pacific in which an economic hierarchy is increasingly dominated by China while the USA can only remain the dominant actor in a security hierarchy. This replaces the old, post-Second World War US-led regional order ‘organised around American military and economic dominance’ (Ikenberry 2016, 9–10). In this emerging regional dual hierarchical order, China exerts leverage over regional states by using coercive means of economic statecraft to play hardball politics with them whenever they cross the line. This has been demonstrated by China’s overt use of economic coercion against Japan, the Philippines, South Korea, Australia and Lithuania in recent years over the East and South China Sea disputes, the deployment of US Terminal High Altitude Area Defence (THAAD) missiles in South Korea, the Australian call for an independent inquiry into the origins of Covid-19 and Taiwan (Han 2008; Lai 2018; Lim and Ferguson 2019; Chan 2020; Lee and Schreer 2022).

Given the harmful effects of China’s state capitalism, why did the Bush administration tolerate the ‘unfair’ Chinese industrial policy practices? This was because US officials optimistically assumed that China was ‘progressing gradually and purposefully towards economic liberalisation’ (Blustein 2019). This was echoed by an unnamed senior Bush administration official who was quoted as saying that ‘China is changing’ and ‘we really see a China that is trying to establish itself as a more respected figure in a global sense’ (Dao 2002). Western researchers and mass media had for a long time ignored or overlooked China’s industrial policy and the advocacy behind it because of, according to Heilmann and Shih (2013, 21), a ‘fixation with the plan-to-market narrative that focuses on the purportedly universal, or convergent, macro-processes of marketisation, economic liberalisation and privatisation.’

On the policy level, there was also an ‘implicit bargain’ between Washington and Beijing in which China’s trade surplus, although partly caused by undervalued Chinese currency, would be ploughed back into the American financial system by the buying of US securities, including US Treasury bonds and those issued by Fannie Mae and Freddie Mac. This bargain would enable the USA to keep its interest rates low and, more importantly, American consumers to go on a spending spree (Ikenberry 2020, 272). However, paradoxically Chinese financial investment in the USA and low interest rates served to fuel the global financial crisis of 2007–2008 (Chan et al. 2012, 72–73).

Helped by a continued boom in exports²⁷ and left largely unscathed by the crippling global financial crisis,²⁸ China’s rapid economic rise has led many to argue that US hegemony is on the wane. Discussions of ‘hegemonic transition’ (Beeson 2009), a ‘succession of hegemonies’ (Clark 2011) or ‘order contestation’ between the USA and China (Goh 2019; Heritage and Lee 2020) have been in vogue in the academic world. By the middle of 2010, policy-oriented China-watchers had seen signs of China’s assertiveness. As Jeffrey Bader, senior director for Asian affairs on the Obama administration’s National Security Council, observed, Chinese security analysts claimed that as an aftermath of the global financial crisis, the USA was in decline and/or distracted. US economic hard power was dissolving when the country had to rely on Chinese financial investment to finance its current-account deficit (Bader 2012, 79–80).²⁹

This article posits that Chinese state capitalism, which espouses norms and institutions fundamentally different from, if not entirely incompatible with, neo-liberal Anglo-American capitalism, began to emerge and take shape in the first decade of the twenty-first century when the Bush administration mistakenly believed that continuing economic engagement with China (and China’s enmeshing in globalisation) would eventually lead it to embrace the American model of capitalism as well as the liberal international order. No longer perceiving China as a significantly threatening entity or a strategic competitor after 9/11, the Bush administration had done little to challenge the growth of Chinese state capitalism, which enabled China to develop the economic means to become increasingly assertive and coercive in foreign policy.

The next section will first discuss Bush’s East Asia policy which, according to Christensen (2009), aimed to prevent China from coercing regional states, and examine how effective that strategy was.

Bush’s East Asia policy: AWOL

This section discusses the Bush administration’s East Asia policy by first engaging with Christensen’s argument that the USA preserved its military presence in the region. Literally speaking, this was correct (as discussed below), but American diplomatic presence and influence in the region was significantly shrinking after 9/11, indicating that the USA assigned low priority to it, except in the policy area of counterterrorism. Two issues will be given detailed consideration here, namely the negotiations with North Korea over its nuclear weapons programme, including the Six-Party Talks, and the engagement with ASEAN. These point to the same conclusion: that the Bush administration did not perceive autocratic regimes in East Asia (both China and North Korea) as imminent and direct threats to American homeland security interests.

Aloofness in the second North Korean nuclear weapons crisis

The second North Korean nuclear weapons crisis happened after 9/11.³⁰ In the summer of 2002 US intelligence agencies gathered evidence suggesting that North Korea was developing a highly enriched uranium (HEU) programme for the purpose of developing nuclear weapons. In October 2002 when James Kelly, Assistant Secretary of State for East Asia and Pacific Affairs, visited Pyongyang and presented his hosts with the allegation, Kang Sok-yu, North Korean First Vice-Foreign Minister, appeared to confirm the accuracy of the intelligence reports (Mann 2004, 344–45, Funabashi 2007, 93–111). It resulted in the unravelling of the 1994 Agreed Framework, signed with the Clinton administration, and in the North Korean declaration in April 2003 withdrawing from the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) (Snyder 2007, 153–54). Consequently, a regional security regime to address the North Korean nuclearisation crisis began to emerge. It was embodied in the Six-Party Talks, which involved the two Koreas, China, Japan, Russia and the USA.

Treating the North Korean Kim Jong-il government as an ‘evil’ regime³¹ and believing that the Agreed Framework did not serve US interests and had to be nullified (Funabashi 2007, 135–65), Bush was reluctant to deal with Kim directly. Focused on the Middle East, he decided to ‘outsource’ the management of the nuclear crisis to China behind a façade of multilateralism (Funabashi 2007, 305–06, Snyder 2007, 157). As a party to the talks notwithstanding, the USA initially did not prefer that multilateral approach. The rationale for holding the Six-Party Talks, according to Charles Pritchard, a former US official, was ‘negative but not positive’ (Chan et al. 2012, 52).³² Indeed, it was Pyongyang that proposed holding Six-Party Talks in order to claim the ‘authorship’ of the process while requesting opportunities for bilateral North Korea-US talks during the multilateral negotiations (Chan et al. 2012, 53). Beginning in August 2003, China played the role of convenor and host of the talks.

Despite achieving two tangible results, namely a Joint Statement of September 2005 and an Action Plan of February 2007 for the implementation of the Joint Statement,³³ little progress was ultimately made in resolving the nuclear crisis by diplomatic means. During the Bush administration, North Korea neither dismantled its nuclear weapons programme nor returned to the NPT or International Atomic Energy Agency (IAEA) safeguards; it instead conducted its first-ever, albeit not fully successful, nuclear test in October 2006. The USA refused to offer North Korea any security guarantees other than verbal assurances that it would not invade. In short, the process of denuclearisation was in limbo (Chan et al. 2012, 53). However, and notwithstanding the president’s previous ‘axis of evil’ rhetoric, the Bush administration assessed North Korea as a state that had limited capacity to harm the USA directly, and Kim Jong-il as a ‘rational’ leader who was primarily concerned about regime survival (Snyder 2007, 158).³⁴ It therefore eschewed actively seeking regime change in North Korea or carrying out pre-emptive strikes against it, although North Korea harboured such a fear (Olsen 2007, 47, Pollack 2011, 140–45). Senior leaders and officials within the Bush administration such as Vice-President Dick Cheney and Under-Secretary of State John Bolton also maintained that China, rather than the US, would be adversely affected by the North Korean nuclearisation because, according to a ‘nuclear domino’ theory, Japan would likely arm itself with nuclear weapons in response (Funabashi 2007, 302–03). In addition, there was no military solution to the North Korean nuclearisation; therefore Colin Powell, Secretary of State during Bush’s first term, had claimed that North Korea was ‘not a crisis’ (Mann 2004, 346).

The US’s ‘stand-aloof’ approach, however, provided China with favourable opportunities to re-engage North Korea after Hu Jintao took the helm of the CCP in November 2002 (especially after assuming the most powerful position of Chair of the CCP Central Military Commission in November 2004). Hu’s new pro-engagement approach to North Korea emphasised, among other things, the need for forging closer economic ties between the two countries and enhanced coordination in dealing with common adversaries (Chan et al. 2012, 54). Although the scale was comparatively small, China–North Korea commercial trade has since then burgeoned. It rose to $2.8 billion in 2008 from $370 million in 1999 (Aden 2011). Beginning in 2003, top-ranked Chinese leaders, including Wu Bangguo (then Chair of the National People’s Congress, in October 2003),³⁵ Li Changchun (ranked eighth in the Standing Committee of the CCP Politburo, in September 2004), Hu himself (in October 2005) and Xi Jinping (then Vice-President of China, in June 2008), had visited North Korea and offered the country economic assistance. This caused South Korean suspicion that it violated UN Security Council sanctions against North Korea over its nuclear programmes (Chan et al. 2012, 54–56). While unwilling to impose punitive sanctions on North Korea, China was eager to maintain its leverage over it. Even after the first nuclear test by North Korea on 9 October 2006 and the passing of UN Security Council Resolution 1718 on 14 October, Hu continued his engagement approach by dispatching State Councillor Tang Jiaxuan, who was the Foreign Minister in 1998–2003, as his special envoy to Pyongyang to meet Kim Jong-il, with the aim of reviving the Six-Party Talks (Funabashi 2007, 464, Snyder 2007, 164–65).

Bush’s policy towards North Korea was also at variance with the polices of the administrations of Kim Dae-jung (1998–2003) and Roh Moo-hyun (2003–2008) in South Korea. Kim, the first popularly-elected South Korean president, represented an era of leaders who sought to ‘break the client state mold of US–ROK [Republic of Korea] relations’ (Olsen 2007, 58). Both Kim’s ‘sunshine policy’ and Roh’s ‘peace and prosperity’ policy encouraged economic engagement with the North so that the latter might be enticed into pursuing Chinese-style economic reforms. Their policies chimed with Hu’s new approach, helping China to strengthen its leadership role on the Korean peninsula. However, Bush did not give his blessing to Kim’s conciliatory sunshine policy when they met in Washington in March 2001 (Daalder and Lindsay 2005, 65–66). Therefore, the Six-Party Talks were transformed into a ‘1-2-3’ line-up, in which China, Russia and South Korea (the ‘3’) were disposed to seek conciliation with North Korea (the ‘1’), leaving the USA and Japan as the ‘2’ which insisted on imposing pressure on North Korea (Martin 2007, 70).

To sum up, the Bush administration was incognisant of North Korea’s deep-rooted nationalist suspicion of Chinese leverage over it³⁶ and refused to engage with the ‘evil’ regime directly. As the Kim regime had felt gripped by fear of an American invasion as part of its GWOT, North Korea was left under mounting pressure to accept, albeit grudgingly, the central role of China in managing the Korean peninsula. China was thus effectively handed a sought-after opportunity to re-establish an exclusive sphere of influence in North Korea.

Absence from engagement with ASEAN

Before 9/11, Southeast Asian states already had misgivings that the USA under the Clinton presidency did not render them with direct financial assistance during the Asian Financial Crisis of 1997 (Ba 2009, 380). Bush’s Southeast Asia policy post-9/11 was preoccupied with counterterrorism. Although there were successes and good US-ASEAN cooperation, especially after the Bali bombings in October 2002,³⁷ the USA had achieved little in forging economic ties with ASEAN states. It did promote several initiatives, including the US-ASEAN Cooperation Plan (ACP) in August 2002, the Enterprise for ASEAN Initiative (EAI) in October 2002 which aimed to generate a network of bilateral free trade areas, the ASEAN-US Enhanced Partnership in November 2005, and the ASEAN-US Trade and Investment Framework Arrangement (TIFA) in August 2006. However, the USA only managed to sign a free trade agreement with Singapore in May 2003, which was the most open economy in Southeast Asia. Negotiations over the same type of agreement with Malaysia and Thailand became deadlocked because of vocal resistance from protectionist interest groups on all sides, aside from a coup in Thailand in September 2006 (Cronin 2007; Ba 2009, 384). Given their economic reliance on export-led growth, Southeast Asian states were looking for a market and a source of investment beyond the USA as a new engine of growth (Ba 2009, 389). While the USA was attempting to forge bilateral economic relations with Southeast Asia with limited success, China and ASEAN began to discuss the establishment of an ASEAN-China Free Trade Area, and a framework agreement was signed in November 2002. As noted by Cronin (2007, 13), the USA was unable ‘to effectively address China’s growing regional role and influence and the parallel rise of Asian regionalism’. Abdullah Ahmad Badawi, Malaysia’s Prime Minister in 2003–2009, was quoted as saying that the USA ‘seems content to move only in the direction of bilateral F[ree]T[rade]A[greement]s instead of engaging ASEAN as a group’ (Ba 2009, 385). China was making economic and commercial inroads into Southeast Asia at the expense of the USA.

As noted earlier, Bush’s diplomatic absenteeism from East Asia was most obvious during his second term (2005–2009). It was shown in Secretary of State Rice’s decisions to skip the 2005 and 2007 ARF meetings and Bush’s own decision to cancel a US-ASEAN summit in September 2007 (Ba 2009, 378). The Bush administration was also hesitant about joining the East Asia Summit (EAS), which was founded in 2005, because membership would first require the USA to sign ASEAN’s Treaty of Amity and Cooperation of 1976 and Washington had concerns over the loss of the right of freedom of navigation through the Strait of Malacca after signing the treaty. Accordingly, the USA did not join the EAS until October 2010 under the Obama presidency (Cronin 2007, 17).³⁸ Overall, during Bush’s presidency there was a recurrent complaint in ASEAN that the USA was suffering from ‘attention deficit disorder’ regarding the association (Ba 2009: 372).

A key area where China’s ‘creeping assertiveness’ may pose a threat to the security of its neighbouring states is in the realm of territorial and maritime disputes (Storey 1999). In an analysis of the South China Sea disputes, Andrew Clubb suggests that there have been four major turning points in China’s assertiveness—in 1973, 1987, 1992 and 2007, with the last one happening during the rule of Hu Jintao and the Bush presidency (Clubb 2020/21). Even though it would be naïve to argue that if Bush had invested more political capital in Southeast Asia, China would not have become increasingly assertive in the South China Sea during and after his presidency, his disengagement from ASEAN did enable China, with less external constraint, to initiate an upsurge in its level of assertiveness in the disputes with its neighbours by expanding its maritime patrol activities within the area enclosed by the ‘nine-dash line’ (Clubb 2020/21, 112–19).³⁹

The long-term impact of Bush’s absenteeism from East Asia in the wake of 9/11 was that it opened the door to China’s coercive diplomacy and expansionism in the region. Coupled with rapid economic growth partly aided by its membership of the WTO, China utilised its growing economic clout to create a regional sphere of influence, presaging a return of the long tradition of Sino-centrism in East Asia, although the impact and consequences of this would largely be felt after Bush left office. China’s rare-earth ‘embargo’ against Japan in September 2010 in the wake of an escalation of their territorial dispute over the Senkaku/Diaoyu Islands in the East China Sea was the first case of China’s use of economic statecraft to coerce a neighbouring country. After the standoff over Scarborough Shoal—a dispute between China and the Philippines—in April 2012, China managed in July of that year to prevent ASEAN from issuing a joint statement on the issue by providing substantial economic assistance to Cambodia, which served as the ASEAN Chair that year. Although it did not declare or admit to it openly, China also allegedly imposed a ban on Philippine banana imports in 2012–2016 (Heritage and Lee 2020, 185–86).⁴⁰

Conclusions

The point of departure of this article is an order transition in the Asia–Pacific from American hegemony to a ‘dual hierarchy’ in which China and the USA dominate the economic and strategic/military realms, respectively. With increased hard power, China has been more assertive than ever before in dealing with its neighbouring countries. This article has therefore asked, what has made this order transition possible? In answering this question, it makes two contributions to the scholarship. First, it has put forward an argument that while China’s ‘assertive turn’ in its foreign policy and behaviour apparently took place after Xi Jinping took the helm of the CCP in 2012, what made that turn possible was Bush’s modified policy towards both China and East Asia in the wake of 9/11. China under Hu Jintao was offered the time and geopolitical space to achieve state-led economic development and create an emerging sphere of influence at the expense of the USA. Second, the rationale for the Bush administration’s policy shift can be conceptually understood from the logic of order-building, which is primarily aimed at weakening and excluding the most threatening entities to the USA in order to create an international order congenial to its interests. After 9/11, Bush and his colleagues perceived international security through the lens of ‘irrational’ rogue states, an all-encompassing war on terrorism and homeland security. US deployment of human and material resources to the Middle East in the global war on terror during Bush’s tenure offered China (under the leadership of Hu Jintao in 2002–2012) the time and geostrategic space in East Asia to quietly adopt a state-led development model to enrich the economy as well as the state-owned enterprises, and enabled the country to act assertively in East Asia by employing coercive economic statecraft. Preoccupied with the Iraq War and later entrapped in the quagmire there, the Bush administration paid lax attention to the economic ascendancy of an illiberal China, especially the consequences of the emergence of state capitalism in the Chinese domestic economy, and remained diplomatically aloof from East Asia.

Three conclusions may be drawn from this study. First, it is far from true to claim that the USA is always bent on containing a rising China, as many Chinese believe.⁴¹ For at least some of the time during the Clinton and Bush administrations, American leaders were of the belief, albeit mistakenly, that economic engagement with China would likely bring about political and economic changes in the country that would make it part of the western-centric liberal international order.

Second, before and after 9/11 the USA has pursued engagement with and made concessions to China while paying scant attention to China’s domestic political economy and to how Beijing wielded its power externally. Rather than helping shape China’s policy choices in the interests of the US, it has only served to empower an illiberal China. It demonstrates little evidence that the liberal commercial or capitalist peace theory, on which economic engagement is premised, is valid for dealing with Chinese communists, who do not gravitate towards pro-liberal democratic and economic changes in developing economic interdependence with the West.⁴² Domestically state capitalism, upheld by state-owned enterprises and bureaucrats, is the order of the day. The CCP regime has continuously held zero tolerance of political dissent. Political suppression has been extended from the Chinese mainland to Hong Kong after the unilateral imposition of the National Security Law on Hong Kong from Beijing in late June 2020 (Cheng 2022; Hung 2022). Externally it has not become less belligerent either. In July 1995 after Lee Teng-hui’s ‘private’ visit to the US, the Chinese army conducted a series of military exercises in the waters near Taiwan (Mann 1999, 328–29); twenty-seven years later in August 2022 after House Speaker Nancy Pelosi’s visit to Taiwan, it launched more menacing military drills around Taiwan (Kuo et al. 2022). In the South China Sea, China seized Mischief Reef by force in 1995, occupied Scarborough Shoal in 2012 and began land reclamation activities on the Spratly Islands at the end of 2013 (Heritage and Lee 2020, 128, 177, 185). More attention may need to be paid to the questions of why the West’s engagement with China has failed (Friedberg 2022) or how China has defied American expectations (Campbell and Ratner 2018).

Finally, although order-building is almost always conducted by great powers, how other states and actors react to the order-building project has much bearing on the success of the project. Trust in the credibility of American continued commitment to the Asia–Pacific security architecture among regional states since the Bush presidency has been precarious, if not fragile. With lingering concerns over abandonment by the USA, Asia–Pacific states were eager to cement ties, at least in the domain of economic relations, with China. The last thing they would like to face was being intimidated by China while the USA was loath to offer support.⁴³ The G7 did not address and counter China’s economic coercion until 2023 (The White House 2023). Normatively speaking, American order-building strategy ought not to be unilaterally decided by the USA according to its order-building logic but commonly shaped and shared by its allies and friends; the USA should promote political and economic engagement with them to build their favoured order. However, as shown above, Bush evinced little interest in developing and pursuing such a collective East Asian order-building strategy. As far as the results are concerned, Republican presidents were less committed to the security of East Asia as a whole than Democratic ones.⁴⁴ China’s primacy in East Asia could not be ruled out if the Trump presidency returned in 2025.