Make Room for China

Hani Chkess

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 For the past two decades China focused on internal development, and adopted

international strategies that would deter conflict: Do not attract attention ( ) and

friendly neighborhood relations). (Fasslabend, 2015) In September 2013, president

Xi Jinping announced the Belt and Road Initiative (BRI) putting a normative spin on Chinas

approach to international relations. China aspires to re-emerge as a world power with the end-

goal of becoming the leading global power through the Belt and Road Initiative. In this paper, I

will first succinctly present the Chinese approach to implementing the BRI, then analyze the

implications of the Belt and Road Initiative and how Chinese efforts to establish the rule of law

are a viable solution to maintaining global stability.

If China wants to stay on track it has to shift from attracting foreign investment to laying

equal stress on both attracting foreign investment and going out (Mengzi & Chunhao, 2015)

Over the past five years Chinas economic growth rate has dropped four percentage points, rising

wages and development have reduced its comparative advantage in cheap production, and the Xi

Jinpings government is pressed to find solutions for Chinas production surplus. These issues are

hard to solve on a national level without causing disruptions in the Chinese societyproduction

quotas on the Chinese factories would lead to a rise in unemployment and further slowdown of

the economy. The BRI initiative would open up new markets where the excess Chinese

production and capital would be directed and production outsourced. In addition, entering

international trade would, in theory, put more pressure on the Chinese manufacturers, triggering

a revitalization of the industrial chain, which is a somewhat backward domestic manufacturing

industry. (Mengzi & Chunhao, 2015)

Through the One Belt One Road Initiative China wants to establish a free trade zone with

all those regions in the world that have great strategic significance to Chinas development and

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sustainable growth. (Mengzi & Chunhao, 2015) The project includes 55 percent of world GNP,

70 percent of global population, and 75 percent of known energy reserves, (Karim, 2015) and it

involves more than 20 countries. The Road would stretch from the South China Sea to the

Mediterranean, crossing The Indian Ocean, East Africa, and the Red Sea. The economic initiative

would focus on trade, infrastructure, capital, labor, investment, and would create an environment

of shared growthChina would stay on its upward trajectory, while the other members of the

BRI would benefit from positive spill-over effects thorough increased investment. Iran is one of

the first BRI members to benefit from Chinese investment: In February 2016, the first direct

cargo train from Shanghai arrived in Tehran, completing a journey of some 10,000 km.

(Council, 2016) China has been one of the key importers of Iranian oil, with many Chinese

companies displacing there from the EU and the USA. China is also planning a $12 billion

investment in a renewable solar power plant in Iran 1. Chinese investments are not, however,

limited to Asia. China has recently made investments in Romania in the port of Constanta, which

may help Romania to progress towards its EU 2020 targets, notably in R&D spending and

improvements in energy efficiency. (Council, 2016)

The Road and Belt initiative will also help mitigate the high risk associate with Chinas

dependence on imports. China heavily relies on the international market for its energy resources

importing 80% of its crude oil and 50% of its natural gas, (Karim, 2015) and these resources

currently come through the Straits of Malacca. The Straits of Malacca connect the China Sea and

the Indian Ocean and are one of the choking points (Evers & Gerke, 2006) energy resources

have to pass on their way from the areas of production to their final destination. In 2003, almost

20,000 oil tankers passed through the Straits, carrying one half of the worlds oil transported by

sea. These straits are of supreme importance to the Chinese government, because anyone

1 Bloomberg News AgencyJuly 15, 2016

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controlling them can restrict Chinas access to energy resources. Therefore, the Belt and Road

initiative will provide alternative facilities for ensuring a steady supply of energyby investing

in infrastructure, the Chinese government will be able to use different routes, such as the China-

Pakistan economic corridor.

Another important goal of the BRI is financial integration and increased capital flow in

the Asian markets. The reform will be initiated by China through two investment funds, AIIB and

the Silk Road Fund, which will initially set the stage by investing in long term development of

infrastructure. As market forces pick up speed in Asia, these projects will progressively

streamline the channels for the flow of international production factors. (Mengzi & Chunhao,

2015) The investment effort and financial initiative would then strengthen the RMB assigning it

to a more central role both in the world and Eurasia. An internationalized yuan would help

Chinese companies venture abroad more easily and cut their borrowing costs. Furthermore, the

RMB will probably also become a pricing currency, at least in Eurasia, which will eliminate

currency volatility from the equation.

While the BRI promises to create an economic network of mutual growth and prosperity

there are many challenges China has to overcome in order to realize its ambitions. Geopolitical

issues, great power rivalries, and even Chinese dishonesty might come in the way of the BRI and

stifle Chinese ambitions to become the world-leading power.

First, many students of international relations claim that setting up a free trade zone

through the Belt and Road Initiative would not promote mutual economic development. On the

contrary, it would prevent weaker countries from developing their national economies because

cheap products from their stronger partners would prevent them from competing in the open

market. Alexander Hamilton and Friedrich List argue that nascent industries do not have

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economies of scale and need to be protected by national governments until they are strong

enough to develop a comparative advantage. The United States, Germany, and the UK developed

their industries under tariff barriers. Hamilton argues that free trade only benefits the hegemon,

whose mature industries can produce much more and cheaper than the infant industries it is

competing with. Following this line of thought, some central Asian States such as Kazakhstan,

Uzbekistan or Kyrgyzstan would find it almost impossible to enter free competition with China.

In 2011 China opened the SREB free trade zone and has mainly acted as a hub for Kazakhs to

buy Chinese goods rather than the reciprocal promotion of Kazakh industry. (Lain, 2016)

Furthermore, many countries face internal problems which would hamper Chinese efforts to

develop infrastructure in Asia: Somalia and Yemen are war zones home to global terrorism,

pirates and drug smuggling networks.

Second, China will have to find solutions from the countless problems that stem from the

complex geopolitical environment in Asia. Referring to the BRI as the Chinese Marshall Plan

is inaccurate because the countries aided by the US after the second World War were more

homogenous than Asian countries. America was consolidating a democratic, Christian Europe,

whereas China would operate in an environment where actors suffer from ambiguities,

economic inequalities, and indecisions. (Karim, 2015) Interconnection of infrastructure,

agreement on policy, and common rules will be difficult to achieve because each country has its

specific needs: As Pakistan, Myanmar and Thailand are inland countries with coastal lines, a

strategy for land-sea interconnection might be a good choice or interconnection on the land may

be more critical. Island countries Sri Lanka and Indonesia attach greater importance to port

economy and maritime corridors. (Mengzi & Chunhao, 2015) In addition, China does not have

a long-standing tradition of listening and accommodating to the needs of those standing in its

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way. Traditional hard-fisted Chinese leadership might fail to accommodate for the religious,

political, economic, and ideological differences between the member countries, thus deterring

cooperation towards creating a free-trade economic zone in Asia.

China masked its power ambitions through economic diplomacy, but has nevertheless

triggered a period of transition in the realm of international relations that is similar to the bipolar

world order from the Cold War era: 21st Centurys Maritime Silk Road initiative is Chinas plot

to counter the U.S. policy on pivoting toward Asia and developing a strategic rebalance in

Asia - Pacific. (southchinasea.com) The system seems to be transitioning from a unipolar,

American-led world to one where China competes for system leadership. China is also facing

disapproval from its neighbors which has caused strategic conflicts and tensions with both the

United States of America and its allies: tensions between the two nations will intensify because

Chinas expansive sovereign claims in the South China Sea and the East China Sea, and the

introduction of military strategies of anti-access and area denial have posed challenges to the

interests of the U.S. and its allies as well as its regional partners, and also to the security of

global commons. (Mengzi & Chunhao, 2015) China is a seen as a great threat by the ASEAN

community, and the development of the Belt and Road Initiative will negatively impact the

already tense China-ASEAN relationships. For instance, in 2013 the Philippines petitioned the

Permanent Court of Arbitration in The Hague contesting Chinas 85% ownership claim of the

South China Sea contested areas. The Chinese government adopted a very rigid approach

refusing to engage with the tribunal, and insisting that any territorial disputes should be settled

through bilateral negotiations in accordance to Declaration on the Conduct of Parties in the South

China Sea: "With regard to territorial issues and maritime delimitation disputes, China does not

accept any solution imposed on China, as concluded by Hong Lei2. (Potkin)

2 Chinese diplomat

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In the South Asia, where China aims to build the Bengal-China-India-Myanmar Economic

Corridor and the China-Pakistan Economic Corridor, increased Chinese presence has had a

negative impact in Sino-Indian relationships. The main challenge in the region is tactfully

navigating the India-Pakistan conflict, which currently is in the way of the Maritime Silk Road.

Sino-Pakistani collaboration has a complex nature and is covers many areas such as security,

economic aid or nuclear development. China bailed the Pakistani Government in during the 2008

crisis, by offering it a loan of $500 million3 and has also helped Pakistan develop its nuclear

program. Defense collaboration includes Chinese warships being provided to the Pakistani navy

at low prices and joint military exercises in order to secure transfer of relevant military expertise.

As proven by heavy Chinese investment in Pakistan, and president Xi Jinpings visit

Pakistan supports the Belt and Road Initiative. China is planning to divert some of the oil

imports coming through the Malacca Strait, already discussed in this paper, through Pakistani

refineries. Pakistan has handed over the management and operation of Gwadar port to a Chinese

company. Gwadar is located at the juncture of South Asia, Central Asia, and the Middle East.

(Karim, 2015) Some people familiar with the issue also speculate that the port might become

Chinas new naval base. China is also building deep sea ports in Myanmar, Sri Lanka, and

Bangladesh in order to secure alternative facilities for energy supply. Additionally, Chinas

Peoples Liberation Army is advancing in the Indian Ocean: The PLA Navy docked its

submarines in the Chinese-built port in Colombo in September and October 2014, which created

much furor in Indian strategic and political circles. India considers Chinese expansion in the

ports surrounding the Indian Ocean a military objective seemingly hidden under commercial

projects.

3 Marantidou, V. Revisiting Chinas String of Pearls Strategy: Places with Chinese

Characteristics and their security implications, June 2014

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As mentioned by professor Karim, Chinas strategic developments in South Asia have drawn

sharp reactions from India. India has historically been the main power and net security

provider in the Indian ocean and it is not keen to see its leadership status challenged. In response

to Chinese efforts to lay the groundwork for the future Maritime Silk Road, India started to

augment the naval capabilities of its neighbors by providing both equipment and intelligence. For

example, it undertook the surveillance of the Maldives and helped Sri Lanka in its fight against

terrorism.

Some Indian scholars claim that Chinese commercial developments in the Indian Ocean

region is in fact a covert String-of-Pearls strategy, through which China would establish a series

of nodes of military and economic power. These nodes would increase Chinese power in the

region, undermining Indias control and influence. Chinas out-of-area operations create a

security dilemma in the South Asia region. The New Delhi Government is making balancing

efforts to contain China. For example, India joined strategic alliances with major powers such as

the US, Japan, and South Korea and adopted a Counter-String-of-Pearls Policy: India, as a

counter-measure, is also building forward naval bases in its offshore islands in the Indian Ocean

and making efforts to elbow out China from the strategic ports as mentioned. India has already

made counter-moves in the Maldives, the Seychelles, and Sri Lanka as mentioned. (Karim,

2015) Similarly, China believes that the proximity of its newly developed ports to India makes

them vulnerable targets to a missile strike. Therefore, future construction of air defenses and

hardened infrastructure (Townshend, 2011) is a viable scenario.

Through the Belt and Road initiative China challenges both Indian hegemony in South

Asia and American hegemony on a global scale. The international environment now reminds of

the treaty of Warsaw and raises an important question: how do we preserve world peace and

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prevent a trade war? I believe that the solution lays in setting up powerful international regimes

that will enforce the rule of law and prevent possible security dilemmas like the one between

China and India. In theory, having the rule of law on a supra-national level would create a stable

system that would enhance predictability and certainty. Having a working international legal

system would also provide a mechanism for dispute resolution and protect the individual rights

of national actors.

Establishing the rule of law can also ensure stability within the BRI community. If

national interests of individual members are protected, then China stands a better chance at

creating a stable international environment. It is important that a consensus is reached when

setting up the new international regime that will regulate interaction within the BRI, because

without cooperation member states might easily contest the legitimacy of the BRIs internal

rules. Agreement, however, is hard to achieve, because establishing such laws would put checks

on Chinese power and limit the possibility of arbitrary actions. For example, small countries

would most probably push for antidumping policies that would protect their infant industries and

help them grow economically. Such conditions are hard for China to accept since one of the main

reasons it initiated the BRI is to find a solution for its production surplus.

Global tensions such as the ones previously mentioned can be mitigated through

cooperation and interdependence. Robert Keohane and Joseph Nye make the argument that

through complex interdependence in key areas international actors can be brought together: We

are all engaged in a common enterprise. No nation or group of nations can gain by pushing

beyond the limits that sustain world economic growth. No one benefits from basing progress on

tests of strength. (Keohane & Nye, 2012) Strong economic interdependence in key areas such as

the military or environmental policies will make it more costly for repeated game players to

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default on their agreements. Concerning the Sino-Indian security dilemma converging Indian and

Chinese security interests would build confidence between the two rivals. India and China should

collaborate on issues such as counterterrorism by doing joint military exercises and setting up a

healthy policy dialogue, which would improve transparency. Similarly, New Delhi and Beijing

should cooperate in building joint infrastructure projects, which would mitigate mutual concerns

regarding the others intent. Having a joint supra-national institution that would regulate energy

issues in the region will help both Chinese and Indian fears. For example, both countries are

required to have strategic oil reserves for national secure. Having an international body mediate

dialogue and create transparency concerning this issue should prevent future conflict.

Last, the United States should recognize Chinas growing influence in the world and

accommodate for a peaceful transition to a bipolar international system. Chinas international

presence will inevitably grow proportional its economic capabilities. For instance, US presence

in the Mediterranean is looked at with pessimism in southern Europe, after the recent economic

crisesAmerica is being blamed for an irresponsible international financial policy. Furthermore,

American presence in the Middle East has been declining in the wake of the Arab Spring, when

America turned its back on some of its allies. China is naturally taking advantage of these

retreats and building strategic alliances for future expansion.

Having America and its allies accept China as a contester to world leadership and

cooperation towards an international regime based on the rule of law is hard to envision on a

global level. Keohane argues that international regimes are set up by countries to pursue their

own selfish interest, but now the world needs a regime which represents Sino-American

interests, a paradox. It would be hard for the United States and China to reach a consensus that

would ensure a working international regime. Without regular interactions and reciprocity, an

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international regime loses its credibility and ability to impose high costs on defaulting.

Additionally, China does not have a history of complying to international regulations when they

do not represent her interest. A case in point are the different approaches China adopted in the

South China Sea problem and the Indian Ocean dispute. As previously discussed, China refused

to accept international arbitration concerning its conflict with the Philippines, insisting that it

should be solved through bilateral negotiations. On the other hand, China is disputing Indias

claim to historically being the net security provider in the Indian Ocean: Only a UN Security

Council mandate may delegate such an authority to any single power or combination of powers.

(Karim, 2015) Furthermore, China refused to comply to the international embargo imposed on

Pakistan and continued to sell the Pakistani government weapons.

The Chinese need to develop a stronger international presence in order to secure future

growth throws international relations into a period of transition. As China challenges the status

quo, fear of global economic and military conflict rises again after the Cold War and it is

important for both the establishment and the rising Chinese camp to make efforts to form a

strong international community based on cooperation.

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