It is now thirty years since I first came to live in China.

As I was driven to the airport this morning in Beijing, I remembered the day that I first arrived in what was still called Peking Airport in those days. This morning, as we drove along the airport expressway, I saw the old road to the right of the expressway. Today it is a small, two-lane, local road. Back then, it was the only road to the airport, still full of horse-drawn carts, a few donkeys and even the occasional camel. The old terminal building was still in use, of the type that were built across China during the decade after liberation with the help of lots of Soviet advisors, in the unique tradition of socialist realist architecture. Nonetheless, when we arrived in Peking, that is my wife and I, and our nine month old baby daughter Jessica, we arrived at what our Chinese friends then called "the new terminal" which boasted China's first ever luggage conveyer belt. In fact there was not just one luggage conveyor belt but there were two luggage conveyor belts, one for domestic flights; the other for international.

Back in those days, I also remember driving myself around Beijing, amidst a sea of bicycles. There was very little traffic. Apart from the odd Red Flag limousine, with light grey-brown curtains drawn tightly to preserve the anonymity of whichever dignitary, foreign or domestic, was inside.

I remember my first visit to the Great Hall of the People to accompany our Ambassador to a meeting with the then Chairman of the National People's Congress, Peng Zhen, as he patiently explained to visiting foreign barbarians the need for an independent legal system in China.

I have similar memories of when I first arrived here in Shanghai in 1984. Hongqiao Airport, unlike Peking, didn't have one luggage conveyor belt, it had none. We just picked up our bags from a small trolley in a mad scramble among the disembarking passengers. The road from the airport to the residence of our consul general at the Jingan Binguan was also a small, back road. The tallest buildings, in Shanghai then, were still all the old buildings on the Bund.

I remember our first meeting with Mayor Wang Daohan over lunch at the Shanghai Mansions. Mayor Wang took me to the window, pointing up the Huangpu along the line of old colonial buildings adorning the Bund. He said that Shanghai was lagging behind the rest of China in the pace of economic reform and opening up to the world, lamenting that the Cultural Revolution had been particularly severe in Shanghai, and that Deng Xiaoping was now increasingly impatient with Mayor Wang to rapidly improve progress and how could I help.

I also remember five years later being back in Shanghai, this time in the company of Mayor Zhu Rongji, at a banquet at the old Hong Kong Shanghai Bank Building, then the headquarters of the Municipal Government, for the official announcement of the Pudong Economic Development Zone. We looked out the window, across the Huangpu and all I could see was a few old factories, some deserted buildings and a swamp. Back then we thought Jiang Zemin and  Zhu Rongji were dreaming. It turns out in fact they were dreaming: an early version perhaps of the China Dream we have read so much about under the presidency of Xi Jinping. Of course Pudong today proves that dreams can become a reality.

So you will understand that as I return to Beijing and Shanghai thirty years later, I have a particular perspective of the changes that I have seen unfold over the decades with my own eyes.

Over that time I have been back in China more than one hundred times.  I have also lived here for several years, including for several months while here in Shanghai as Acting Australian Consul General. I have been here in multiple capacities over the years: as a scholar, as a diplomat, as a businessman, as a Member of Parliament, as a Foreign Minister and as a Prime Minister，and  now as a simple international citizen.I have been able to look at China though many different lens, and at many different times, both good times and difficult times for China. And for all these reasons I am on balance optimistic about China's future, both at home and abroad. It’s easy to be pessimistic but the harder course, and the more useful course, is informed optimism.

As you know, this optimism is not the universal view in the US, the West and the rest about China’s future. Some fear China's rise. Other's just resent it. Many welcome it. My objective today is threefold: first, to outline why I am on balance an optimist about China's future; second, why we must still be cautious about preserving the peace in the decades ahead; and third, what I believe we can do in positive terms to maximize the prospects of peace and stability, rather than do the easiest thing of all, which is simply to list all the things that could go wrong.

Grounds for Optimism

When the history of the 20th century is written, Deng Xiaoping will be recorded as one of its towering figures in the world. He dreamt of a modern China. He was courageous enough to take the hard political and policy decisions necessary to turn that vision into a reality and if we know anything of the events of the Cultural Revolution, the events of 1976 and the events of 1978. These were hard political times.

And 35 years later his dream of a modern China is coming to pass. This is no small thing in human history. It is a very big thing.

I sometimes think some of China's harshest critics should think for a moment what China would be like today without Deng. Had the politics and the policies of the Cultural Revolution continued, China could easily have become one big, giant version of North Korea: insular, backward, impoverished, ideological and possibly aggressive. You chose to do it differently. He chose to do it differently and I honor him for that. Deng, and those who have come after him through successive generations of Chinese leadership, have changed all that and, as a result, have altered the course of Chinese and global history I believe for the better.

This doesn't mean Deng was perfect. He wasn't. No political reformer ever is as compromises are inevitably made. That does not mean China is perfect. It is not. No country is. Nor is mine. And China's achievements will be evaluated differently according to different value systems.  That is natural. But if you are a student of Chinese history, and I am poor one but I am a student nonetheless, the trend thus far has been decisively positive. Chinese living standards continue to rise, although unevenly. The individual freedom of the Chinese people is much greater than before, although there are still constraints. China is now the source of a new wave of creativity, innovation and entrepreneurialism, and not just a country that copies the innovations of others, as some suggest. China's growing national wealth has also contributed to global wealth as Chinese trade, investment and capital flows are now central to the health of the global economy. And despite regional anxieties about China's growing military capabilities, the truth is that China has not deployed its military force to threaten the invasion of its neighbors. Nor has China during its long history deployed its military force abroad, in contrast to the European colonial powers, even when China has had the demonstrable capability to do so. None of these things have happened by accident. They have the result of deliberative policy leadership, planning, and action over many decades.

Of course, not everything is going well for China. China faces multiple challenges for the future, like income inequality, corruption, environmental sustainability, climate change, etc; the transition to a more sustainable economic growth model, based on consumption rather than investment, services rather than manufacturing, urbanization rather than a nation still grounded in the rural poor; then there is the problem of domestic terrorism and what I’ve seen has happened on the streets of Beijing, Urumqi, and at Kunming railway station，as well as the real risk of regional conflict through strategic miscalculation. But in general I believe there are reasonable grounds for optimism that China can negotiate its way though these challenges, effectively, peacefully and, I hope, collaboratively. And those in the West who believe that the current Chinese system is simply structurally unsustainable, and will one day simply implode, are deluding themselves and, in some cases, engaging in wishful thinking.

The Need for Caution

The truth, however, is we now find ourselves, at a particularly dangerous juncture, in international reactions to the continued rise of modern China. In international relations, particular dangers arise when the aggregate power, either real or perceived, of a rising power begins to approach parity, again either real or perceived, of an established power.

History is replete with examples of this. And on this centenary of the outbreak of the First World War, we should be particularly mindful of these. Britain and Germany, Germany and Russia, Austria Hungary and Russia, through the agency of the latter's Serbian ally. This is called in the literature “Thucydides Trap”, whereby the established power may be tempted to take pre-emptive action against the rising power as strategic parity approaches, but before strategic pre-dominance by the rising power is achieved, or alternatively, when miscalculations are made by rising powers about uncertainties concerning the resolve, capabilities and intentions of an established power. In other words, when power transitions are under way it can be highly destabilizing hence the need for caution - extra caution on the part of everybody.

Of course, these dynamics are complicated further when various tripwires exist through the agency of friendships, understandings and alliances with other less powerful states. In the Asia-Pacific region today, it is arguable that we face a not entirely dissimilar set of circumstances. The United States is the long-established dominant global and regional power. China is the rising power – at least in the region and increasingly globally. Depending on the method of calculation, purchasing power parity or market exchange rates, the Chinese economy will end up larger in aggregate size than the US economy within the next decade and probably sooner rather than later. On calculations of broader economic power, including educational, scientific and innovation capabilities, there is much less certain discussion about the latent sources of power for both China and the United States. Then, of course, there is America's soft power, an extraordinary asset which still sees more students around the world flocking to its shores to study than anywhere else in the world.

As for political power, this is a much more difficult calculation concerning the resilience of the two country's political systems, their capacity to adjust to future challenges, and future "black swan" events or shocks over time. Some point to the capacity of Chinese political and policy institutions constantly to trial, to adapt and, to implement new policy solutions to long-standing policy problems, driving all three processes through the agency of the powerful, centralized machinery of a strong Chinese state. This is contrasted in China to the "inefficiencies" of democracies. In the same vein, they also point to the perceived disfunctionality of the US political system in particular, compounded by the recent decision of the Supreme Court removing further limits on campaign finance and the increasing corruption of the electorate boundary RE-districting system. Both these factors favor political incumbencies, reducing the number of potential swing seats within the Congress, reinforcing the need for candidates to appeal to the extremes of both parties within the primaries process in order to win. This therefore further reinforces the grid-lock within Congress, and between Congress and the Executive, thereby preventing a normally robust political system from dealing effectively with the great challenges that now present themselves to the future of American power.

Americans and their democratic allies also point to what they see as the inherent legitimacy of their political systems where legitimacy ultimately precedes from the ballot box. At the same time critics also tend to ignore the remarkable capacity of the US system to rapidly re-invent itself. To re-set its economic direction, and to draw upon the inherent political ballast within their system, compared with some the deep rigidities of the Chinese system, which sometimes makes it much more difficult for China to undertake rapid policy change when necessary. In other words, nobody is perfect, there are rigidities and difficulties in both systems.

As for diplomatic power, it is clear that China's sphere of diplomatic influence is growing regionally, internationally and through various global institutions. I know that, I’ve seen it and I’ve felt it. This has become particularly evident in the last nine months since last year's Diplomatic Work Conference in Beijing. Not only do we see greater evidence of Chinese diplomatic activism (fenfa youwei), we also see this manifest in a number of recent international diplomatic actions by China since then. This brings us to the military equation where the United State will remain a vastly superior power to China for some decades to come.

Bringing these various judgments together, we discover a complex reality in the aggregate calculus of national power for both China and the United States for the decade ahead. At this stage, there is no neat binary conclusion to be drawn about when one power surpasses the other. For the foreseeable future, it is likely to be a much less tidy equation than that.

To these power realities and power perceptions, we must then overlay the current state of regional relations, and associated regional conflicts and crises. These include: the North Korean nuclear program, the particular threat to stability on the Peninsular itself from the north to the south, tensions in the East China Sea; the Taiwan Straits, which many international commentators have assumed has simply gone away because of the recent successes in cross-strait diplomacy, and also because it is no longer in the newspapers as much as before. This ignores the fact that Taiwanese presidential elections are never far away, as are decisions on US weapons sales to Taiwan; then there are the continuing territorial disputes in the South China Sea involving a number of states; and these entire stand apart from long-standing questions concerning intra-ASEAN relations involving Burma, Laos, Cambodia and Thailand. In other words, we are faced with much regional complexity on top of the wider shifts in great power relations between China and the US. This is therefore a strategic environment which invites much caution from all parties as we approach the decade ahead. 

To avoid strategic drift in the US China relationship towards conflict or war, complicated by the vast range of regional security policy tensions between various regional states, will require active, forward-leaning diplomatic leadership from both capitals to preserve the peace.

The Way Forward

Over the last six months, there has in fact already been a real sense of drift in US China Relations. I would argue this drift is already in danger of becoming a current. I do not propose here to rehearse the reasons why. Experience tells me that usually gets us nowhere. Blame games are rarely helpful in diplomacy.

But it seems as if the future course of this important relationship is being shaped by issues and events as they arise, rather than by a central organizing principle that seeks pro-actively to manage these, and continue drive the relationship in a positive direction. A little over twelve months ago, I wrote an article for Foreign Affairs magazine in the US that called for a program of regular working-level summitry between the countries' leaders in order to develop such a "central organizing principle," at both the conceptual level, and at the operational level as well. I am the first to concede this is difficult work given how different the two countries' philosophical frameworks and political systems are, as well as the complex power trajectories that lie ahead of each of them. But it is not impossible, as Henry Kissinger and Zhou Enlai demonstrated in arguably more complex circumstances nearly half a century ago.

At a conceptual level, there is much work to be done on questions of values, norms and the rules of the regional and global orders. There is a common assumption that Chinese and American values as they pertain to the international order are utterly alien to each other. I do not necessarily think this is correct. Of course there are deep differences, not least on the question of the universality of human rights. But there are commonalities as well which must be developed into areas of common endeavor. Similarly with the often opaque world of Chinese and American intentions and with their respective definitions of their national interests.

The constructive challenge lies not simply in listing all that we might disagree on. That is easy.
The constructive challenge lies in doing the reverse and working out what common political space exists between these interconnected realms of values, intentions and interests, and whether that space is sufficient to accommodate common policy endeavor. That is hard.

At an operational level, there is also much work to be done in critical areas including North Korea, counter-terrorism, cyber security, space, and counter disaster management as well as the wider questions of regional and global security. Similarly on the economy with different proposals for a Regional Comprehensive Economic Partnership, the Trans Pacific Partnership, and bilaterally, of course, the Bilateral Investment Treaty. Then there is the great new domain for strategic cooperation in the area of climate change and global environmental sustainability.

At a conceptual level, I have written before that the overall US China relationship has historically been characterized by what I have called "the seven C's " (I apologize to my Chinese friends who are not in the habit of using the English alphabet)： 1, co-existence, 2, cooperation, 3, contribution (i.e. stake-holder theory), 4, competition, 5, containment, 6, conflict, 7, just plain old contradiction. The latter, of course, namely "contradiction," is just another way of saying that it’s all too hard to try to conceptualize the relationship at all, given that the differences are so great, in which case we should all just stumble along and hope that it all works out in the end. At various stages of the US China relationship over the last 35 years, and in various sectors of the relationship, one or a combination of these terms have been varyingly used to define the general nature of the engagement between the two, generally across a spectrum from positive to negative. I believe it’s time we need to consider something new. Regrettably it’s yet another "C": namely "constructive".

The word “constructive” is a positive expression both in English and Chinese. In fact, it is unambiguously positive.  “Constructive” also contains within it the meaning that the two sides are building something positive together (or more broadly, multiple parties building something positive together).   “Constructive”, of course, is an adjective. There is of course a noun, called constructivism, which refers to a particular school of IR theory and practice. This should be explored further. In the meantime, however, we could begin to talk about “constructive institutionalism”. I have already discussed elsewhere about the possibility of “constructing new global public goods together”. More modestly, we could talk about “constructive engagement”, or in addition, "constructive engagement" resulting in longer-term transformation. The bottom-line of all of these is, language is important, in the future of US-China diplomacy as long as that language reflects and underlines commonly accepted conceptual realities.

At present, the only language we have, which is useful, is the Chinese formulation of “A New Type of Great Power Relationship”. The question we are seeking to answer is what further strategic concept and what strategic language should be agreed upon to put flesh on the bones of the much boarder conceptual framework of “A New Type of Great Power Relationship”. The truth is that neither country can easily undo disagreements from the past. What they can do, however, is build new arrangements and institutions for the future. China's historical complaint against the US and the West is that they set the rules of the existing international and regional order, and did so prior to the birth of the People's Republic. But China is now expected to comply with them. The truth is it is virtually impossible to fundamentally re-write the rules of the existing order without bringing about a deep destabilization of global politics. Despite all its imperfections, including those of the UN system, at least we have an order. For most of human history, there hasn't been one. And I think we would all agree that it is better to have an order than not have one. This, perhaps, is the most basic common value, or what could perhaps be called a “meta-norm," shared by both China and the United States. This is by no means a trivial point, given that the opposite of order is chaos, and we have seen what that can produce for humankind.

By "constructive engagement", and/or “constructive institutionalism”, I mean the US and China, in concert with the rest of the international community, working together to "construct" new agreements, new institutions and new norms for the future needs of the order. And by definition this means that China is at the table. Climate change is of course an obvious case in point. The world's largest and second largest emitters could and should work together now, as a matter of global urgency, to construct a new global public good around the challenge of planetary sustainability. In fact, a central organizing theme for the US and China should be to "constructively engage in the creation of new global public goods," both to benefit their respective countries bilaterally, but also to benefit others both regionally and then globally.

As for the operationalization of a new relationship of constructive engagement between the two, this of course becomes the substance of the work program of the series of working-level summits that should ensue. Sunnylands was held just on a year ago. It was a productive start. Work was commissioned on the future of the relationship. It’s now time for them to report as well as to decide on a strategic roadmap for the future. And hopefully a roadmap and a work schedule based on "constructive engagement" in dealing with the many challenges that exist, as well as crafting the "new global public goods" we need for the future. There must be another such working-level summit this November when President Obama visits China. Perhaps Hangzhou's "West Lake" would be a great venue. Remember the words of the great poet: "Above we have heaven, while below we have Suzhou and Hangzhou." And, of course, the Xihu, with so many positive elements, is of particular significance.

Conclusion

Rome was not built in a day. Nor will strategic trust be created overnight between China and the United States. Trust is based on a combination of words and deeds. The truth is at present the trust deficit is great indeed. But what we can do is "cross the river, feeling your way, stone by stone," or by building trust step by step. Otherwise we run the grave risk of drifting in whichever direction the current may take us.

Deng Xiaoping of course used this aphorism of "crossing the river by feeling your way across stone by stone" to describe the torturous path of China's reform process over the last few decades. Year on year, having lived and worked through this entire period myself, it often seemed that progress was small, sometimes non-existent, to the extent that sometimes it went into reverse. But now with a perspective spread across the full span of over 35 years, the overall trend is clear. The starting point was leadership: a political decision and a policy action summed up in eight simple characters: "reform on the domestic front, while on the foreign front, opening to the outside world." And 35 years later, China has once again become a great power. While acknowledging that in doing so, the process of crossing the river can be both arduous and at times dangerous. The time has come to apply some of Deng Xiaoping's wisdom to the great challenge of reforming China's principal international relationship - that with the United States.

Of course it will take two to tango. The US would need to embrace a similar strategic concept to that which I have called “constructive engagement,” or “constructive institutionalism," or the “common construction of new global public goods.” The language of course needs much work. But if they do so, I believe we can build a new type of great power relationship between the United States and China for the future. The alternative is potentially a very ugly one indeed.

Since I first came here 30 years ago, I have seen many things change both in China itself, and in the US China relationship. The China of today is virtually unrecognizable from the China of 30 years ago. So too for the US China relationship which now has a breadth, depth and texture unimaginable back then. 

Since then, there have been five presidents of the United States. There have also been four generations of Chinese leaders. In one capacity or another, it has been my privilege over the years to have met most of them, each making the best contribution they could to constructing this important relationship from nothing. The challenge now faced by Presidents Xi and Obama is arguably more difficult than those faced by any of their predecessors, apart from Nixon and Mao. The stakes are now higher than they have ever been, both for their countries and for the world. History is issuing a clarion call to them both. And I still believe that we can still build as President Xi Jinping has said a new type of great power relationship.

I thank you.

(All views expressed in this speech is the sole responsibility of the speaker.)

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