On January 27, 2021, the China Program at Shorenstein APARC hosted Professor Hau L. Lee, The Thoma Professor of Operations, Information & Technology at the Stanford Graduate School of Business for the virtual program “The Pandemic, U.S-China Tensions and Redesigning the Global Supply Chain.” Professor Jean Oi, William Haas Professor of Chinese Politics and director of the APARC China Program, moderated the event.

Professor Lee focused on an important question that has only become more pressing due to the COVID-19 pandemic: How, if at all, should businesses redesign their supply chains? Since the beginning of the pandemic, explains Lee, there has been an increase in calls for “redundancy” in supply chains in order to protect them from the problems they faced early in the pandemic, when China was first hit by shut downs and slowed productivity. Advice has been varied, ranging from the “China Plus One” strategy in which businesses simply add a secondary production location, to completely domesticating supply chains.

Lee warns, however, of the perils of overreaction. There are numerous risks that come along with a fully domestic supply chain, not least the danger of “having all of your eggs in one basket.” Instead, says Lee, businesses should move cautiously and, instead of fully divesting from China, should use the country intelligently. 

Professor Lee’s “In and Out Design” encourages businesses to work from the inside out, securing and strengthening their supply chains by starting at home. Companies must first build “internal supply chain excellence,” after which they can move on to making sure their strategic partners are equally strong and can work to their advantage. Eventually, companies can move on to strengthening the extended value chain and, ultimately, their entire ecosystem. Using strategies like dual response, leveraging “lubricants,” and bolstering capacity-building capabilities, businesses can create a more stable future. 

The session concluded with a fruitful Q&A between Professor Lee and the audience, moderated by Professor Oi.

A video recording of this program is available upon request. Please contact Callista Wells, China Program Coordinator at cvwells@stanford.edu with any inquiries.

This op-ed by Aynne Kokas and Oriana Skylar Mastro was originally published in the Australian Financial Review.

The images of bare-chested, flag-waving MAGA loyalists overtaking the US Capitol flooded US social media and news channels in the days following the January 6 siege against the electoral college count. Memed and amplified, the same images circulated widely on Chinese social media and state-owned news sites without even the need for critical commentary.

The literal destruction of the US Capitol at the hands of President Donald Trump's followers required little imagination to characterize abroad as the downfall of American democracy.

There are many reasons for pessimism. According to one of the most authoritative indexes, Polity, the United States is no longer the world’s oldest continuous democracy, dropping in status to a system that is part democracy, part dictatorship.

Beyond the domestic concerns faced in the aftermath of the breach of one of America's most hallowed buildings, the Capitol siege was a win for China. US soft power, one of its comparative advantages in the great power competition, has taken a huge hit.

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Soft power is “the ability to get what you want through persuasion or attraction in the forms of culture, values, and policies”.⁠ The US has been the primary beneficiary of soft power, with its globally recognized brands, pop culture, fast-food chains, world-renowned universities, and political values.

It is relatively low cost and high impact compared with other forms of power. The United States' relative attractiveness is one of the reasons America prevailed in the Cold War.

The Chinese government is having a propaganda field day. More than ever, the US looks like a country in decline, discouraging to allies and potential partners. Chinese commentators have noted that America's days as the "city on the hill" have come to an end. This is karma, some say, payback for the US supporting opposition groups, as in Hong Kong. As one netizen commented on the popular microblog website Weibo: "So lucky to be born in China."

China has also been trying to increase its soft power through traditional mechanisms such as building its media, education, and tourism sectors. It has enjoyed only moderate success in these areas because of its censorship, pollution, and lack of independent civil society.

But COVID-19 has led to the strengthening of other Chinese public diplomacy efforts, such as its landmark Belt and Road Initiative global trade and investment scheme.

Related initiatives such as the Digital Silk Road, a program to build out global digital infrastructure using Chinese technology, and the Health Silk Road, a plan to export Chinese health expertise through things such as COVID-19 laboratories and vaccine diplomacy, draw on China's comparative advantage in a top-down soft power approach.

Meanwhile, the Trump administration has undermined the historical sources of US soft power. It has shuttered visa lines, investigated international students on campus, and driven the rise of a culture of nationalism. The cancellation of the Fulbright US Student Program and the Peace Corps program in China are prime examples. And the COVID-19 decreased US media production, educational exchange and tourism, which shrank opportunities for promoting its democratic values on the global stage.

A bird’s-eye view of America's relative soft power may seem to offer cause for optimism. Even after four years of Trump's buffoonery and "America First", the US is still far ahead of China, ranking fifth in overall soft power, while China ranks 24th. And isn’t this what matters in competition?

Yes and no. The problem is two-fold. First, the US relies more on its political values as a soft power source than Beijing does. Ironically, this has especially been the case during the Trump administration. National Security Adviser Robert O’Brien has argued that democracies and authoritarian countries such as China “are offering a different approach to the world”. Secretary of State Mike Pompeo has argued to international audiences that democracy is “what we’ve got right”.

Second, Beijing has tried to leverage its comparative advantages to build soft power through pathways other than political values, especially where a top-down government approach is effective. China set up COVID-19 testing labs in Palestine in agreement with Israeli and Palestinian authorities. It extended its hand in Africa by building more than 70 percent of its 4G infrastructure.

Depending on need, useful solutions can be as compelling as political principles.The future of the US as a world leader is at stake. American military base access worldwide depends on perceived political alignment between the US and its allies. In the tech sector, the widespread adoption of US platforms relies on other countries finding that benefits to allowing in foreign platforms outweigh the potential political risks.

Successful multilateral treaty negotiations on issues such as global trade and climate change rely on the perception of a dependable US political system.

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Soft Power and U.S.-China Competition

One thing the Trump administration has identified correctly and managed to get consensus on, says Chinese military and security expert Oriana Skylar Mastro, is that the United States is in a great-power competition with China. Biden now accepts this framework, and Mastro expects him to maintain the basic principles of U.S. Asia policy, such as strategic ambiguity and ensuring Taiwan’s defense through arms sales. The difference will be in Biden’s approach, which is based on “multilateralism, strengthening partnerships, and not trying to provoke Beijing for the sake of provoking Beijing.” This approach, believes Mastro, is going to improve the U.S. position in terms of competition.

A core component of the U.S.-China great-power competition, however, is soft power — the ability of countries to get what they want through persuasion or attraction in the form of culture, values, and policies. Soft power, argues Mastro, is an area that is very hard for a president to have control over and rebuild, and American soft power has taken a tremendous hit with the breach of the U.S. Capitol on January 6. Demonstrating the decline of American democracy, the scenes from the pro-Trump mob attack have been a win for China and are hardly encouraging for U.S. partners and allies.

Biden can do a lot to tackle U.S. domestic problems and improve the political image of America abroad. But soft power, concludes Mastro, is organic. “I fear that President-elect Biden is going to learn that soft power, once lost, is very difficult to regain.”

The U.S.-Japan Alliance and Security in the Asia-Pacific

In shifting to relations between the United States and Japan, Kiyoteru Tsutsui focuses on how the traditional aspects of the Japan-U.S. alliance are playing out in the current geopolitical theater. In Tsutsui’s view, Japan’s early brushes with Chinese might in the 2010s has left the country particularly keen on ensuring that a strong counterbalance exists to China’s strategic advantage.

To that end, Japan has proactively partnered with other nations on trade deals such as the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The fact that both of these major free trade agreements were concluded without U.S. involvement is significant, and whether President Biden makes any response will be “one the more closely watched issues among foreign policy experts in the coming years,” by Tsutsui’s measure.

The reemergence of ‘the Quad,’ and even discussions of a ‘Quad+’ that includes nations such as South Korea, is of particular interest to Tsutsui. Such groups provide additional avenues for further developing the ‘free and open Indo-Pacific’ strategy originally envisioned by Prime Minister Abe. But Tsutsui is also not opposed to the idea of engaging China directly in multilateral efforts as long as China understands the U.S. and Japan’s resolve in countering Chinese aggression and non-peaceful ambitions.

The Korean Peninsula in the Spotlight

When it comes to engagement on the Korean peninsula, Gi-Wook Shin hopes the new administration will avoid a reactionary response and backsliding into old habits. The temptation to respond with an “anything but Trump’s” approach to handling relations with North Korea may be strong, particularly given the president’s unusually forward relationship with North Korean leader Kim Jong Un, but Shin counsels to not set aside everything Trump did in regards to the DPRK.

“Bringing North Korea and Kim Jong Un more into the international community was an important step that no other president has made,” he says. Shin strongly cautions against a return to the strategic patience typical of the Obama era. With Kim’s consolidated control and North Korea’s wielding far more advanced nuclear capabilities and significantly strengthened ties to China than it did eight years ago, a return to previous patterns of diplomacy would fail to address the present circumstances on the Korean peninsula. Shin urges the Biden administration to reemphasize human rights and deepening dialogues with its diplomatic counterparts in Seoul. He foresees an improvement in U.S.-ROK relations but warns that North Korea can be a source of tension between the two allies.

Opportunities for Allies in Southeast Asia

Donald Emmerson also recommends strengthening diplomatic ties to the nations of Southeast Asia and the Association of Southeast Asian Nations (ASEAN). By his assessment, “ASEAN needs creativity. It needs new ideas rather than simply following the path of least resistance.” Emmerson envisions this well-spring of creativity coming in part from robust new efforts by the United States to engage with the region diplomatically and academically.

Existing forums such as the Bali Democracy Forum can provide a ready-made platform for engagement, while active participation in gatherings such as the Global Town Hall organized earlier this year by the Foreign Policy Community of Indonesia (FPCI) provide easy opportunities for the United States to meaningfully engage with Southeast Asia.

An Outlook on the Broader Asia-Pacific

Closing out the panel’s remarks, Thomas Fingar offers measured optimism for the future. “I think the incoming U.S. approach to the countries in Asia, China included, is going to be pragmatic and instrumental, not transactional. Every nation who thinks they can contribute, does contribute, and is willing to play by a rules-based order can be part of the solution.”

Fingar expects the Biden administration’s foreign policy to be “focused on problems, not places” — to be driven less by particular animosity or affection for certain countries and more by addressing global issues that promote American interests, such as climate change, the impediments in the international system to advancing American economy, and preserving security.

By consensus, the incoming Biden administration’s most immediate concerns are overwhelmingly domestic. But as Mastro articulated, the effects of the United States’ domestic policies directly impact its perception, standing, and sphere of influence around the globe.

Effective relationships between the United States and the Asia-Pacific cannot be sustained in the long term with an ongoing ‘America first’ agenda or by pursuing zero-sum goals. Rather, the Biden administration must focus on finding solutions to multilateral needs by working side-by-side with Asian nations as co-sponsors and co-leaders.