OF SILK ROADS AND SACKCLOTH

Chinese President, Xi Jinping, who has already cast a long shadow over China with his relentless campaign against corruption, has set about recasting both Asia — and world — geopolitics with his twin initiatives of land and sea Silk Roads.

China has put its money on the table, declaring in February that its Silk Road Fund, designed to finance its so-called “Belt and Road” initiatives, is now active.

State-owned agencies, such as the China Investment Corporation, China Development Bank and the Export-Import Bank of China, are investors in the fund. China has pledged an initial contribution of US$40 billion (this is a quite apart from the controversial US$50-billion Asia Infrastructure Bank).

Over the next decade, China plans to invest as much as US$800 billion in the new Silk Road and a Maritime Silk Road. While both will create economic opportunities for China, the projects also provide an alternate investment opportunity to US Treasury bills.

To date, China’s foreign reserves have swollen to US$3.9 trillion – much of this held in US-dollar denominated instruments, such as US T-Bills.

Chinese officials – naturally – laud the projects as showing China’s commitment to strengthen relationships by helping stimulate economic development along the countries in the two Silk Roads.

However, much scepticism has been engendered from those outside China.  When asked to comment at an international forum in Hong Kong recently, some participants said they would prefer a more global and less China-centric approach.

Li Yao, Chief Executive of the China ASEAN Investment Co-operation Fund, says it would be better to link the Silk Road structure to existing international agencies — to give it a global perspective.

As the proposals stand today, they are seen as embracing what is described as a “hub and spokes” strategy — with Beijing sitting in the centre as the hub, and other countries playing the role of spokes. This analogy echoes the view of a former assistant US Secretary of State for East Asia and the Pacific, Christopher Hill (ATI October 2014) that China treats countries in Southeast Asia as “tributary states’. China’s approach to regional integration differs from ASEAN-style or EU-style regionalism, says David Arase, Visiting Professor of International Relations at the John Hopkins-Nanyang University Centre for Chinese and American Studies, based in Singapore.

“It will be a core-to-periphery structure of connectivity — regional decision-making and membership status, a sort of hub (Beijing) and spokes (other countries) arrangement,” says Arase, who has looked at China’s Silk Road proposals in-depth.

Raymond Yip, Deputy Director of the Hong Kong Trade Development Council, says the first stop on the China maritime Silk Road is ASEAN — because of its location and growing trade with the Mainland.
Yip says China’s trade with ASEAN has been growing at 8.3 per cent on-year, compared to 3.4 per cent in its trade with the world. “China-ASEAN trade has doubled in the last two years. It will reach US$500 billion this year,” says Yip.

China is projecting that its bilateral trade with Southeast Asia — with a growing population of some 630 million — will be worth US$1 trillion a year by 2020.
The infrastructure that constitutes the two Silk Roads is both hard and soft. Hard infrastructure is the steel, concrete and machinery that goes into building railways, highways, ports, energy pipelines, industrial parks, border customs facilities, and special trade zones.

The main beneficiaries of the investment to develop both Silk Roads are certainly Chinese companies. The Maritime Silk Road focus is overseas port development and operations by Chinese firms to manage maritime trade with Southeast Asia.

China is now a net importer of energy, industrial commodities and food, so it needs to secure access to new sources. It is also looking for new markets for higher value-added goods and services, including electronic parts, consumer durables, heavy equipment, and construction and engineering services. But as recipients of Chinese capital, whether they are in the Pacific, Africa or elsewhere, have discovered, Chinese investment does not necessarily lead to the creation of jobs for the local population in host countries.

In a paper for the Institute of Southeast Asian Studies, Arase reiterates the views of other analysts that China’s idea is to build a comprehensive trans-Eurasian network of economic connectivity that will help sustain China’s growth momentum for decades ahead — and draw the countries of Eurasia into China’s economic and geopolitical gravitational field.

Observers based in Hong Kong say Xi first announced his Silk Roads concept at a time when the United States spoke of its “pivot” to Asia. They say China’s concept includes its “friends”, but excludes its “foes”. China has pointedly left out Japan and the Philippines – perhaps conveniently blaming their exclusion on geography.

These are two nations which have been most vocal in their objections to China’s territorial claims in the South China Sea. Vietnam, which has also disagreed with Chinese interpretations of history and territorial claims, has suffered various forms of Chinese punishment, too.

Those “lucky” enough to be included in China’s grand plan are acutely aware that membership to these two Beijing-centric concepts means moving even closer to China’s embrace. Arase articulates a main concern to explain the wariness of some countries – the issue of international arbitration of sovereignty disputes.

China does not believe that such disputes should be settled in an international forum, preferring to resolve them bilaterally.  (China has steadfastly declined to have an international court adjudicate its disputes with countries in Southeast Asia over territorial claims in the South China Sea.)

Arase notes that China is prepared to use force to protect its core interests, including its territorial sovereignty.
Although the relationship between China and other countries in its Silk Road projects is supposedly based on “win-win” principles and reciprocity, Arase says China will reciprocate with material benefits, but if others do not offer proper respect, China will find ways to punish them.

As well as economic dominance, China is looking to replace the US as Asia’s security umbrella. Arase says Chinese leader Xi proposes the New Asian Security Concept on the premise that “it is for the people of Asia to run the affairs of Asia, solve the problems of Asia, and uphold the security of Asia”.

Countries along these Silk Roads will develop an “asymmetric dependence on China”, given that China will have muchn superior economic and military clout vis-à-vis each of them.
Arase says China’s silk roads are a work in progress rather than a pre-conceived master plan.  But then Xi will be in power until 2020, and will no doubt try to shepherd his pet projects to fruition before stepping down.
The Chinese Communist Party and the Chinese Government have been given the task of realising China’s two Silk Roads strategic agenda. “If successful, the end result will be the great rejuvenation of the Chinese nation and the rebirth of a China-centred Asia,” Arase says.

Hopefully, this would restore China’s greatness, and superiority — as in the glory days of Chinese influence during the Han and Tang dynasties. Then, Xi Jinping would have truly cast China’s influence beyond the borders of China and its 1.3 billion people.

* Florence Chong is Editor of ATI Magazine