With inventive foreign policy needed to reassure the Indo-Pacific’s established powers and accommodate Chinese ambitions, this report proposes three complementary strategies: prolong US leadership; protect the territorial status quo; and pursue a policy of ‘strategic ambiguity’ vis-à-vis territorial disputes.

Executive summary

With the centre of global economic gravity shifting east towards Asia, the Indo-Pacific will be this century’s motor of prosperity and innovation. However, this region also faces the risk of hostile international relations, a souring of fruitful economic ties, and even catastrophic war.

China’s bullish claims to vast tracts of disputed land and sea have created an arc of deepening territorial instability stretching from the Korean Peninsula to the South China Sea and the Indian subcontinent. Meanwhile, policymakers across Asia now fear that Beijing plans to use its growing military might to challenge the US-led international order that has underwritten the region’s peace and prosperity since World War II.

Notwithstanding the promise of a ‘new type of major power relationship’ based on mutual benefit and respect, Sino-US ties are also being undermined by strategic distrust. China’s acrimonious territorial disputes with US allies and partners, the US ‘pivot’ to Asia, intellectual property theft, and other irritants are fuelling suspicions that Beijing and Washington are each seeking to achieve their long-term goals at great cost to the core interests of the other.

Inventive foreign policy that can simultaneously reassure the Indo-Pacific’s established powers and accommodate Chinese ambitions is urgently needed. This report proposes three complementary foreign policy strategies to help engineer China’s peaceful rise and safeguard stability in the Indo-Pacific.

1. Prolong US leadership in the Indo-Pacific:

  • A US military and diplomatic drawdown would fuel fears of Chinese domination, which could lead to militarisation among China’s worried neighbours.
  • Beijing’s support for the current US-led international order of free markets, free trade, and freedom of navigation lends itself to continued US leadership.

2. Protect the territorial status quo in the Indo-Pacific:

  • Abandoning the commitment to the territorial status quo would allow China to ride roughshod over the territorial claims of its neighbours.
  • Beijing’s prioritisation of ‘peaceful development’ over realising its territorial ambitions strengthens the case for the territorial status quo.

3. Pursue a policy of ‘strategic ambiguity’ vis-à-vis territorial disputes:

  • Defending the territorial status quo without compromise could push the United States and its Indo-Pacific allies and partners towards war with China.
  • Flexible policy responses to China’s territorial assertiveness avoid the risks of premature appeasement and dangerous escalation.
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