A New Beijing Consensus – De-Risking from Trump

Indian foreign minister S. Jaishankar arrived in Beijing for the first time in five years, for a meeting of the Shanghai Cooperation Organisation. Two fellow members of the Quad – the quadrilateral security dialogue – have been re-assessing their relations with China.

Last week Japan’s Prime Minister Shigeru Ishiba was quoted saying, "If they (United States) think Japan ought to follow what America says as we depend heavily on them, then we need to work to become more self-sufficient in security, energy and food, and less dependent on America."

Over the weekend, the Prime Minister of Australia Anthony Albanese refused to commit his country to participating in any US-led action against China in the Taiwan Straits if such a contingency arose, adding “My government will continue to cooperate with China where we can, disagree where we must, and engage in our national interest."

While Prime Minister Narendra Modi has maintained silence on US President Donald Trump’s many acts of provocation ranging from his claim that he was the peacemaker between India and Pakistan to arbitrary imposition of tariffs and the prolonged bilateral trade negotiations, the fact is that India-US relations have come under unprecedented stress the likes of which we have not seen since the 1990s.

It is against this background that Modi has taken a second look at relations with China and his foreign minister travelled to Beijing. If Australia, India and Japan are increasingly uncomfortable with the manner in which Trump’s ‘America First’ doctrine is unfolding, what then of the Quad?

The recent meeting of Quad foreign ministers has not been particularly reassuring about the future of the group and its agenda. India has now situated Quad within the many groups that it is a part of – BRICS, SCO, ARF, BIMSTEC, and so on – as part of its policy of ‘multi-alignment’.

If indeed there is a Quad summit later this year in India, Trump is likely to arrive to a very different kind of reception, compared to the over-the-top cricket stadium hurrahs he received on his last visit.

A new Beijing consensus

In the aftermath of the trans-Atlantic financial crisis of 2008-09, wrongly referred to as a ‘global financial crisis’, economists and geopolitical analysts around the world posed an interesting question. Will a ‘Beijing Consensus’ replace the ‘Washington Consensus’ in the field of economic and fiscal policy? With the end of the Cold War in the early 1990s and the emergence of the West, led by the US, as the dominant global power an ideology of economic and political liberalism came to dominate policy discourse around the world. The fact that even communist China was pursuing ‘capitalism with Chinese characteristics’ also contributed to this.

Against this background, economists at the World Bank and International Monetary Fund and across many Western institutions advocated policies that came to be known as the ‘Washington Consensus’. It advocated free markets at home, free trade overseas; less government and more private sector; and so on. This intellectual edifice was battered by the trans-Atlantic financial crisis and its economic and social fallout in the US and western Europe.

Mainstream economics was held responsible for the crisis that gripped the trans-Atlantic economies. For a brief moment, traditional Keynesians raised their head across Western universities and claimed that neo-classical economics had met with its comeuppance.

The real deal was, however, the fact that China came out of the crisis unscathed and in fact even helped the US economy regain balance. In the years that followed, the Chinese economy rapidly emerged as the world’s second largest economy and the biggest trading power.

It was against this background that talk of a ‘Beijing Consensus’ gained ground across policymaking establishments around the world. The American decision to print dollars and revive demand, to use public funds to bail out private firms and banks and to increase social spending was viewed as a retreat from the ‘neo-liberalism’ of the Washington Consensus and a gesture to the Beijing Consensus of state-supported economic development.

Over the past decade, this debate lost traction but in reality many governments around the world began pursuing more statist policies. While the Beijing Consensus on the economic policy front gained acceptance, even within the World Bank and IMF, the West succeeded in uniting its allies, partners and friends into a range of groups and alliances aimed at the ‘geo-economic containment’ of China.

The geopolitical game of the past decade was the ‘geo-economic containment of China’, a concept first enunciated by the American strategic analyst Edward Luttwak. This is precisely what President Trump attempted in his first term and has persisted with greater gusto in his second. The world, however, has moved on.

Rather than win allies and friends in his ‘Contain China’ project, Trump’s whimsical and aggressive trade policies and his ‘America First’ strategy has helped craft a ‘New Beijing Consensus’. During Trump-1 and during the Biden presidency, the rest of the world was supposed to be ‘de-coupling’ and ‘de-risking’ from China but after Trump-2 we now see the world ‘de-risking’ from the US.

More countries are re-building bridges with China

From Japan to India, the Gulf to Africa, Europe to Latin America, more and more countries are reducing their risk exposure to the United States and re-building bridges with China.

The Quad, to be sure, was not supposed to be a security alliance against China. It could not be because Australia, India and Japan have demurred on joining forces with the US in case of a war with China in the western Pacific. The US itself is now rethinking any kinetic engagement with China and such conflict is unlikely given the stakes.

On the other hand, the grouping was supposed to be about cooperation on the economic and technological fronts. Trump’s trade actions and China’s ability to so far withstand its ‘geo-economic containment’, and sustain economic growth have meant that countries around the world are re-evaluating relations with China – de-risking from Washington rather than Beijing.

Indeed, it is China’s geo-economic dominance, rather than the geopolitical challenge it may pose to its neighbours and western powers, that is today encouraging leaders around the world to maintain a balanced relationship with China. This is a New Beijing Consensus that President Trump has enabled.

Sanjaya Baru is an author, former newspaper editor and former adviser to Prime Minister Manmohan Singh.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.