Economists generally agree that the cumulative economies of China and India will be larger than that of the G7 by 2030. At present, China’s GCP stands at $9.2 trillion, or nearly 5 times that India.
The two countries have taken very different economic paths. China has chosen to become an exporter of labor-intensive products while India still relies on agriculture and services, particularly in IT.
Russia’s GDP at $2 trillion in 2013, and expected to shrink by 3 to 5% in 2015, less than a quarter of China’s. Russia is a raw material powerhouse and a manufacturing dwarf. As such it should be a natural supplier of oil and gas to China – it is a closer supplier than the Middle East. However, the pipeline that will be built across Siberia will deliver its goods to Nakhodka, a port facing Japan. Russia seems to fear that it will become dependent on China for its gas exports and that China will consider Russia as a vassal state and sideline it on the international scene as the disparities between the two countries grow. China has also to date not given a definite reply to the role Russian gas will play in its energy policy. Price is also an issue since China tends to compare the price of gas with that of domestic coal.
While economists forecast that China’s GDP will overtake that of the US, it still has some way to go as US GDP stands at $15 trillion.
By building its extremely large dollar reserves, $4 trillion, the Chinese Central Bank has allowed the US to borrow at very low interest rtes and has created a situation in which banks have searched for higher yields through lending massively to the housing market. The risk on the currency and on the value of US Treasury paper is extremely large. It is estimated that China holds over 6% of the US debt.
China could, if it so wished, put pressure on the US economic system by buying less US debt, or even selling it, thus precipitating a fall in the dollar and an increase in interest rates. Reprisals from the US could come in the form of new barriers to trade for products made in China.
Should there be a major economic recession in the US, with a consequent loss of jobs, the country may well turn to protectionism. The idea that the globalization process has been essentially beneficial to China will be a driver to reduce imports from that country.
China is also worried that US government borrowing to cover its enormous deficit will lead to high inflation and that therefore the bonds held by the Central bank will lose value.
The US has been putting considerable pressure for China to revalue its currency, the RMB, and thus reduce its competitive advantage based on cheap labor. Some economists, however, believe that a revaluation of the currency may well lead to precisely the opposite effect as funds may then float out of the RMB and into other currencies, thus leading to a de facto devaluation.
The fall of the dollar has revaluated the RMB and thus made Chinese exports more expensive, hurting mostly privately-owned SMEs and halting the modernization process of the economy. The US could allow its currency to depreciate further, to the point where its goods would be significantly more competitive than they are today.
China could take advantage of a weaker dollar to acquire assets denominated in dollars, whether in the US or in other countries. It has thus become a major lender and investor in South America – particularly in Ecuador, Nicaragua and Venezuela where it has committed to invest $250 billion over the next 10 years. This might well be the reason for the US to have softened its stance towards Cuba.
China could also use its reserves to acquire major European corporations in the hope that they will out-compete US companies thus creating an economic war between the US and the EU. It could also use its vast financial reserves to hoard oil and uranium forcing prices of these products to reach new highs.
China feels that the US administration under President Obama has not delivered on its pledge of including China, and other emerging countries, into major economic decisions. Thus, the Obama administration has put pressure on its allies in the Asia-Pacific area to stay away from the Asia Infrastructure Investment Bank, one of China’s pet projects.
As of Japan’s GDP at $5 trillion stands also at four times that of South Korea.
Trade and investment
Asia is in a unique tradition with several world powers sitting on a nuclear arsenal and harboring resentments and old, deep rooted hatreds and territorial disputes. Military budgets are on the rise and economic growth has slowed considerably. Competition exists between the countries we have been considering in this series of articles – it exists in the industrial world, in cyberspace and in outer space.
Asia’s history is one of constant conflicts and long-seated hatred and there are too many potential conflicts that threaten to erupt into wars. There is also a seeming disdain of leaders towards their own people, the most flagrant case being North Korea.
There is also a major gender imbalance in favor of men and this situation has led to fears of a rise in militarism. There is contradictory evidence that unmarried men tend to be more violence-prone than married man.
Almost all the countries covered have strong economic interconnections.
India runs a major trade deficit with China which in 2013 was of over $ 30 billion, with India complaining that Chinese goods take advantage of a whole series of measures put in place by the Chinese government while Indian companies have problems entering the market.
Similarly, Indian companies have had problems entering the Japanese market, but due to quality issues.
With the opening of the Indian economy to foreign investments, Japanese corporations, catching up to a late start, are expected to invest $35 billion over the next 5 years in public-private partnerships. Japan is also expected to become a partner in a major public-private infrastructure partnership project, so large many knowledgeable observers of Indian politics doubt it can be realized, estimated at $100 billion, to create a high technology corridor – the Delhi Metro Industrial Corridor – linking Mumbai to New Delhi. Terrorist attacks have so far frightened would-be investors, however.
China has also been an important investor in India. A sustained economic cooperation between the two countries would make them less dependent on exports to the European Union and to the US.
China has regularly complained about the long delays for India to approve investments by Chinese firms and of a total ban in investments in infrastructure. Chinese workers also have difficulties in obtaining working visas.
Bilateral trade between India and Russia is much lower at $12 billion but after President Putin’s visit, ambitious targets have been set for 2030, essentially in infrastructure projects. Thus, Russia will supply four nuclear power plants.
India’s largest market is the US with bilateral trade between the two countries being of the order of $100 billion with plans to reach $500 billion. The US has thus displaced China as India’s largest trading partner in spite of India’s complaint that US subsidies to cotton farmers undermine Indian exports and that steel exports are unjustly submitted to high tariffs. In turn, the US complains at the difficulties companies face in attempting to enter the Indian market and at the limitations imposed on them when investing.
China and Japan are each other’s largest trade partners, China having replaced the US in that role. Japanese tourists are the main visitors to China. Japan is the major foreign investor in China, taking advantage of low labor costs. However, the tense situation between the two countries, and the increased cost of manpower, has led Japanese companies to sharply reduce their investments.
China is also South Korea’s main trading partner with two-way trade of $230 billion and the signing of a bilateral trade agreement that took effect in February of this year. Koreans are also large investors in China.
China and Russia, in spite of the fact that they are both export-oriented economies, are complementary in that the first is a big consumer of raw materials, primarily energy, while Russia is a major exporter of oil and gas. This has led China to increasingly see Russia as a petro-state with little technological capabilities and unable to pose any type of threat.
Hence, while in the years following the Second World War Russia saw itself dwarfed by the Western economies, the country is, today, overtaken economically by both the West and the East, the latter being represented by China, Japan and South Korea.
In the Chinese-Russian partnership, China appears to be the senior partner and it is safe to say that Russia needs China more than China needs Russia.
Russia sees China as a hedge of its European energy markets. This hedge, however, can only be fully operational in the future as building the right infrastructure that would allow Russia to move its energy exports eastwards is a long-term venture, particularly since Russia’s most productive wells are in the European part of the country while the bulk of China’s population is in the eastern part of their own country.
Two-way trade in 2014 was over $100 billion and while China is Russia’s second largest trading partner, trade with the EU is 4 times that amount. The value of trade is very dependent on the price of oil and gas. It is nevertheless expected to reach $200 billion by 2020.
On completion of the Eastern Siberian Pacific Ocean Oil Pipeline (ESPO), Russia could supply 20% of China’s imports and 33% of Japan’s on condition these two countries choose this dependency.
The two countries have launched the world’s largest joint gas project – the Sila Sibiri pipeline – which will deliver gas to the Russian Far East and to China. There are other joint projects, including in the Arctic, which have received President Putin’s blessing.
Since 2014 commercial contracts between the two countries intensified as Russia was looking for credit and investors in the face of the sanctions imposed by the EU and the US as well as the serious dip in the price of oil. The oil and gas contracts signed between the two countries are, respectively, of $270 and $400 billion over a thirty-year period with Gazprom deliveries due to start in 2019.
Chinese investments in Russia are of the order of $10 billion and new investments have been earmarked for a large variety of projects. The largest investment is a partnership with Rosneft, valued at several billion dollars meant essentially for the Sakhalin-3 block. Rosneft has also secured a $35 billion loan from China in exchange for oil supplies. This envelope is to be used to purchase several smaller oil producers.
China will also invest in a high-speed train between Kazan and Moscow – a $25 billion investment, and other major infrastructure projects are being discussed.
Russia has, in turn, agreed to supply China with the know-how to produce uranium-enrichment facilities and to supply enriched uranium.
Economic ties between China and the US are also important and the interdependence between them appears to be growing rather than slowing in spite of constant mutual accusations of retreating from free trade. The US ran in 2013 a deficit of $318 billion for merchandise trade, one third of the total trade deficit. China is the US’ biggest supplier.
Imports by the US of cheap Chinese products – essentially manufactured goods, machinery, chemicals and transport products – has been of great assistance in controlling inflation and the US has thus transferred to China increasingly large amounts of dollars. Since China is a major supplier of goods to other Asian countries, in particular in South-East Asia, that assemble products for export to the US, the US’ importance to the Chinese economy is even greater than what the above figures show. The US has started a large number of cases against China at the WTO claiming the country is practicing illegally high import tariffs on US goods while simultaneously subsidizing exports. By limiting or banning exports of raw materials, such as bauxite, and allowing prices to climb, China has been accused of developing one more strategy of subsidizing its industry.
Chinese investments in the US are of the order of $50 billion but are dwarfed by the over $400 billion invested by US corporations in China, even though the investment flow has slowed. Statistics in this respect are not meaningful, as often these investments are not reported in US statistics as the flow of funds is channeled through favorable tax havens.
A large number of American firms have established manufacturing facilities in China, and this allowed the US economy to grow with minimal inflation. There is a generally shared belief that China has entered a period of uncertainty, that local competition is adopting a more aggressive stance that in some areas there is over-capacity, that intellectual property is not respected and that the country is increasingly adopting a protectionist stance. Nevertheless, an increasing number of US corporations are dependent on the Chinese economy for their profits and sometimes on products, such as tobacco, whose sales are dwindling in traditional markets.
Also, the US is attempting to sell, in China, alternative energy sources such as solar or wind power technology. This is a major market considering that the Chinese government has announced its intention of investing $200 billion in renewable energies by 2020. US companies, however, are loath to export their latest technology in a country known for closing an eye to the trespassing of intellectual property.
Chinese investments in the US could be even bigger if they were not met by obstacles – the most glaring example being that of Huawei, the telecommunications company, which was blocked from entering the US market.
The Chinese have also become very large buyers of real estate in the US, amassing a portfolio of $22 billion.
The relationship between Japan and Russia is more complex since the two countries have never signed a final peace agreement and Japan still lays claim on the Kurile Islands. Russia is ill at ease with Japan’s future involvement in a missile defense system and has proposed to join the initiative which is led by the US.
Bilateral trade is of the order of $33 billion with oil and LNG taken an important part of this volume, in particular from the Sakhalin deposits. After the Fukushima incident Japan has felt the need to diversity its sources of energy and Russia is a natural supplier. In Russia’s eyes, supplying Japan would counterbalance the increasing dependence on China. Several cooperation agreements to develop new gas and oil fields have also been signed between the two countries.
Total Japanese investments are small, with car makers have plants in Russia, but the most likely investments will target Russia’s Far East, particularly for infrastructures. Several joint ventures have been started in agriculture, energy and infrastructure.
Japan and South Korea are each other’s fourth largest trading partners. Russia has proposed building a railway that would link North and South Korea to the European markets via Russian territory – i.e. connecting to the Trans-Siberian Railway. Such an undertaking would allow South Korea to increase trade with Europe and reduce its dependency on the American and Asian markets.
Bilateral trade between South Korea and the US amounted to $115 billion in 2014 and represented a US deficit of $25 billion. In June 2007, the two countries signed a trade agreement that phases out all tariffs, on consumer and industrial products over a period of three years. Total investments from South Korea to the US is estimated to be $25 billion while US investments in South Korea are of $35 billion.
Bilateral trade between the US and Russia was, in 2014, of $34 billion with a US deficit of $13 billion. Russians are big investors in New York – particularly Manhattan – real estate particularly since the sanctions and the decrease in the price of oil led to a collapse of the ruble. US investments in Russia stand at around $15 billion and are rather diminishing, again in view of the sanctions.
Economic growth has not eradicated poverty in East Asia and estimates of the extremely poor are of the order of 250 million persons. Although continuing economic growth should lead to a reduction in poverty, this should still touch 15 to 17% of the population. The imbalance stems in part by the fact that there is an imbalance between skilled and unskilled labor as well as regional imbalances due to the rapid industrialization of certain areas.
East Asia is today’s the world’s fastest aging. Projections show 20% of the population over 60 by 2050, or two-thirds of the world’s seniors. Already by 2040, the number of people over 60 will be higher than the people under 15.
Just as China is the world’s most populated country, India is the world’s largest democracy. They are the only two countries with a population larger than 1 billion. It is forecast that sometime between 2015 and 2025, India’s population will have overtaken China’s as the former’s population is growing at twice the rate of China’s population. Furthermore, India’s population has a low average age while China’s is aging. Therefore while India may be considered to have an infinite supply of cheap labor, this will not be the case of China in the mid-term future. Thus, while India’s dependency ratio will improve, China’s will worsen.
China’s population is aging rapidly, partly because of a vastly improved health system. This expanding health care system will require substantial additional funding. So will the pension system even though traditionally, children support their elderly parents.
Both China and India suffer from a growing ratio of males to females. The devotion of the children to their parents, when these age, will be difficult to maintain if single men, due to absence of the brides, migrate in search of employment of opportunities.
As the economies of both countries expand at a similar rate, they will need trained engineers and scientists. China graduates 600 000 engineers per year and India 350 000. However, China has a qualitative advantage due to a better educational system.
Japan’s economy is to a large extent driven by demographic change. Birthrates have collapsed with a total fertility rate dangerously approaching 1. With a life expectancy of 88 years, it has today the world’s oldest population, with the largest number of centenarians, but may well cede this place to China by 2050. By 2025 its population over 80 years of age will be equal to that under 15. Thus, two persons of working age will have to support one retiree. On the other hand, they will be a reduction in supporting children.
Older persons invest very conservatively, and therefore the economy might lack the dynamic financial markets required to fuel growth and entrepreneurship.
To a large extent, the same analysis applies to South Korea. North Korea is faring slightly better with a total fertility rate of nearly 2.
Russia has a population of 142 million for a country representing 19% of immerged land. There has been a small rebound in birth rates, but it may not be sustainable. The percentage of the population over 60 is low compared to China, Japan and South Korea, and is of only 20%. The imbalance between women and men – 1 160 women for 1 000 men – and the fact that women in rural areas are unable to find husbands who are not addicted to alcohol, contribute to a low level of marriages, and consequently low fertility. With life expectancy expected to rise in the coming years, while fertility is expected to remain at its present level, the old-age dependency ratio is expected to double by 2050. This would mean that spending on allowances and pensions would rise from the present figure of 9% to 12% by 2030 and 16% by 2050.
The situation in the US, while not as bad, is worrying. Its population of 316 million is growing at the rate of 0.7% and is expected to reach 400 million by 2050. 22% of the population will be over 65. The life expectancy is slightly higher than 78 years but the total fertility rate at 1.9% is below replacement. The reduction in birth rate applies also to immigrants, usually an important component in US demographics.
India’s demographics are quite different. Its population is only slightly below that of China, at nearly 1.3 billion, and it has the world’s largest number of young people since two thirds of its population is under 35, and the average age of the population is 27. But in India too the population is aging and is expected to reach 37 by 2050. At that time 300 million people with be over 60. The total fertility rate is 2.5. It should therefore still enjoy a demographic dividend compared to the ageing societies we have reviewed.
There is a large Tibetan diaspora in India where the Dalai Lama has established his headquarters and this has been an irritant to the Chinese government while achieving little for the Tibetans. The Dalai Lama relinquished his political responsibilities in March 2014 and has been replaced by a Harvard scholar who has never visited Tibet
The presence of a Chinese diaspora in Russia is a more complex issue as there is an important labor movement, of legal and illegal immigrants, along the border and is becoming an important issue in the relations between the two countries. Migrant labor is essentially employed in agriculture and construction. The total number of Chinese in Russia is estimated to be 400 000 including nearly 20 000 Chinese students in Russian universities. The vast majority of the migrants come to make money and have no plans to settle permanently.
The Chinese diaspora in the United States is much larger with 1.6 million immigrants and just as many US citizens of Chinese origin, heavily concentrated in the states of California and New York. Several incidents have questioned the loyalty of some of the immigrants to the host country.
There is a small but concentrated Korean diaspora in China numbering approximately 600000.
There has been a considerable flow of highly qualified and entrepreneurial migrants from India to the US and the Indian diaspora amounts to 2.5 million people and this number is expected to double in the next ten years. Indians are thus the most important group of Asian immigrants in the US. The 75 000 Indian students in the US are the largest foreign group registered in colleges and universities. Indian immigrants have been, on the whole, an extremely educated and successful group with total assets estimated to total $76 billion.
There are in the US over 3 million Americans of Russian descent.
There is a contentious issue between China and India regarding the latter’s water diversion plan which will shift 50 billion cubic meters of water from the Yarlung-Tsangpo, an affluent of the Brahmaputra originating on the Tibetan plateau, to the Yellow River so as to harness hydroelectric energy. This would severely restrict the flow of water to India.
As mentioned in the first part of this article, China and India, but also China and Japan, are competing to secure energy sources.
While the competition between China and India lies in securing energy sources in other countries, that with Japan is not only centred around Russian supplies, but also on the presumed hydrocarbon deposits around two rocky uninhabited islands in the East China Sea that the Japanese government purchased from a private owner and which China claims as its own.
China is uncomfortable with the long shipping route oil takes from the Middle East to its ports. The area is populated by pirates and other revolutionary or semi-revolutionary movements that could be allowed, if not encouraged, to target Chinese vessels. Ensuring the safety of the shipping routes is the official reason for China’s investments in naval power.
Russia fears the political influence that China may exert on the Central Asian republics, in particular through the SCO – the Shanghai Cooperation Organization – set up by China but pf which Russia is also a member. India is, incidentally, an observer, and Russia would like to invite the country to full membership status. Intriguingly, however, while Russia sees to remain the determining factor in influencing policy in Central Asia, China’s position is that these states are free to develop relations with countries not members of the SCO and that the organization is not, and should not, become an anti-Western club.
Russia opposes China’s wish of extending the SCO agreement to cover trade in the form of a free trade agreement, as Russian corporations would be unable to compete on price. It would also open the area to Chinese investments, including in energy projects. China is successful in the region due to the aid it brings, diplomatic pressure and large investments. Russia’s policy has been to prevent Central Asian countries to supply European markets by bypassing the Russian pipeline system and ensuring it has a monopsony. However, in view of the decreased quantities purchased by Russia affected by the reduced demand in Europe, these countries have looked for alternative markets, and China is the obvious one.
Russia would like to see a coordination of pricing policy on energy exports between the member countries that are energy exporters.
Another Chinese advantage is that it is perceived by Central Asian governments as a trading partner and a door to Europe and the Middle East, and not as a competitor as Russia is for gas supplies to Europe. Russia’s role as a supplier of finished goods disappeared with the downfall of communism.
China sees the pipelines for hydrocarbons from Central Asia as a hedge against possible disruptions of shipping lanes from the Middle East. However, just as it is beefing up its Navy to protect those lanes, and to rely less on US maritime power, it will have to beef up its security along the pipelines to protect them from possible attacks.
Russia sees China as a good partner in its policy of containing the US in Central Asia and elsewhere. In fact one can say that Russia sees China as a partner only when its relations with the West are less than perfect – which is the situation at present.
China has been able, so far, to restrain any influence the US could have on Central Asia thus enabling China to secure energy resources for itself and to prevent the infiltration of democratic ideas.
The US has key interests in the region: to support its military adventure in Afghanistan, to have access to energy – without relying on the Russian logistical infrastructure – and to wield political influence in the entire Central Asian area. The US also sees an opportunity to lessen Russia’s position as a gas supplier – should the Central Asian republics find alternative routes for their gas shipments, Gazprom will no longer be in a position to export as domestic demand is rising from an already important base.
China’s strategy has been, and will continue to be in the foreseeable future, to encircle India both through its own forces and through those of its allies who neighbour India, Pakistan in in particular. China, nevertheless, contrary to the US, is not part of any defence organization and thus does not have the burden of having to defend the territories of other nations.
China’s military budget for 2015 has been increased by 10%, reaching $145 billion, a rather steep figure in regard to the slowing of the country’s economy. China has installed missile systems pointing to India’s major cities while China’s industrial heartland is very far removed from their common border.
China’s nuclear strategy is to use their missiles only for a second strike and not to use them for a first strike on any state. It may, however, rapidly change this policy if it so decided.
India is also worried with the building of a port, by China, on the coast of Myanmar, that would give China direct access to the Bay of Bengal. It is also worried by the increasing presence of Chinese submarines in the Indian Ocean. The submarines use Colombo as a refuelling port, leading India to fear that China was building alliances with countries surrounding India – the so-called ‘string of pearls.’ China has called this project the 21st Century Maritime Silk Road, a project financed by China to the tune of $40 billion.
Indian military hardware purchases, the world’s largest with a budget of $250 billion over 10 years, are an important source of cash for the ailing Russian military manufacturers.
The two countries will be jointly developing a fighter plane of the fifth generation. India has also served Russia as a basis to enter the South East Asian markets for military hardware by servicing and training users of Russian equipment sold to those countries.
Russia has been very supportive of India in its conflict with Pakistan over Kashmir, among other things committing not to supply weapons to Pakistan, an embargo it lifted in 2014.
The US has also been a major provider of mostly defensive weapons to the Indian army and this may lead to a licensing agreement for India to manufacture American weapons.
India and Japan have reached an agreement regarding military cooperation. Japan is about to review its constitution to enable it to expand its military which is already considered as one of the world’s best and China would have problems measuring themselves to Japanese firing power in case of a conflict. It is also backed up by the US military that have bases in Japan.
The main discussions between the two countries centred on the supply of nuclear technology and fuel to India by the US. This is an important step considering the fear of nuclear proliferation pervasive in the world today and particularly considering the fact that India will be adding to an already existing nuclear capability while it has never signed the Nuclear Non Proliferation Treaty (NPT). This allows the US to put pressure on New Delhi to reduce its energy purchases from Tehran. Further, India’s rivalry with Pakistan might lead the latter to accelerate its own weapons programs should India proceed with its own purchases.
For India this is an important development as its supplies of uranium are drying out. The treaty also allows it to remain a nuclear player without signing the NPT, although the country has entered negotiations with the International Atomic Energy Agency to negotiate an agreement that would have clauses specific to its situation.
The US has insisted on certain clauses in the treaty such as India accepting not to undertake further nuclear testing, not reprocessing the spent fuel and accepting that the President of the United States certifies, annually, that the country is respecting these clauses.
For the US this is a major step in containing China and relations between China and India took a turn for the worse, with China supplying nuclear power plants to Pakistan, after this agreement was signed.
Another main motivation of the US has been to prevent India making up for its energy shortcomings by purchasing Iranian gas that would be routed through an Indian-Pakistani pipeline. Financial motives are not left too hard behind, considering the deal would generate close to $100 billion in sales for US corporations to which must be added large sales of defence equipment which presently India purchases from France and Russia.
India is also the country with which the US has conducted the largest number of military exercises in recent years.
Following President Obama’s visit to India in 2015, a Joint Strategic Vision for the region was agreed upon. Its objective is to support sustainable development and address poverty. However, the main objective is to ensure India’s Navy plays a dominant role in the Indian Ocean.
Japan is now allowing its military to have an activity outside the country’s territory.
China’s increased militarization worries Japan, particularly the installation of missile launching ramps, China’s declaration of an exclusive maritime and air space, and the highly vocal Chinese media constantly threatening of war with Japan.
China, in turn, fears a reunified Korea with nuclear weapons.
Russia continues to be China’s main weapons supplier as it wants the money from these exports which are of the order of $2 billion per year. Since 2006, the two countries have conducted joint manoeuvres, and intensified their military cooperation.
China, however, no longer represents an overwhelming share of Russia’s weapons exports – a mere 20% today from a high of 70% ten years ago, while the value of total exports has risen considerably, thus decreasing even more the importance of Chinese purchases. Further, with the new cold war, Russia itself is becoming its own major customer.
Russia is eager to maintain this monopoly on Chinese weapons purchases, and the EU and US embargo assist them in achieving this objective. However, inevitably, China will want to be involved in weapons development and testing rather than simply acquiring technology entirely developed in Russia. It has already indicated it does not want to buy finished weapons or assembly kits but want to build the planes in China.
On a longer term basis, it is obvious that China will develop its own military platforms and it is already successfully copying several weapons systems thus severely reducing its imports from Russia. This worries Russia as on a conventional army basis, China would have the upper hand in case of conflict, and Russia would have to rely on tactical nuclear weapons where it has the upper hand. While the INF treaty constrains Russia’s capability of deploying intermediate range nuclear missiles, Russia would probably opt out of the treaty should it feel threatened by China.
North Korea is actively developing its nuclear program and at least one estimate is that it may possess 100 nuclear heads by 2020.
On the other side of the demilitarized zone, there are US forces on the ground. The US keeps 40 000 troops in South Korea.
China and India have fought several border wars and in November 2006 China declared one of the Indian provinces, Arunachal Pradesh, to be part of China, calling it South Tibet. India also claims China is occupying illegally an Indian province in the Himalaya.
In fact, China and India are in a constant military confrontation along their mountainous border.
China is also in a confrontation with several countries regarding their maritime borders, and particularly Japan.
The Diaoyu / Senkaku (Chinese and Japanese names, respectively) islands have been a bone of contention for 120 years but China has lately become assertive on their claims particularly as it is believed that the waters surrounding them are rich in hydrocarbons and fishing grounds.
China’s attitude is also fed by the fact that it is using Japan as a useful scapegoat that helps it maintain strong nationalist feelings of its population, an important cement in a country in which social pressures between different groups, such as rural and urban, are increasing and threatening the country’s stability. China also believes that Japan is on a long-term decline and will not be able to adequately respond to China’ bullying presence.
China’s claim that the entire South China Sea belongs to it has opened the door for the US to pose as the protector of the South East Asian countries.
The South China Sea is an important point of convergence between the interests of the two countries as well as the countries of Southeast Asia. The rise of Chinese naval power – which could become larger than that of the US in the next 5 years – could threaten the US’ dominance in the area.
The South China Sea sees the flow of half of the world’s trade and the conflictual situation could disturb the globalization process which explains why China is becoming interested in continental routes and goods are shipped by train through a new train link which is the worlds longest and reaches all the way to Madrid.
The interest in the area, however, does not stop there. China believes that it contains massive quantities of oil – approximately the same as those in the Arab Gulf.
China’s development and purchase of high-powered microwave weapons, 1500 missiles, submarines and amphibious ships seem targeted at resisting, or keeping at bay, the US Navy in case of a conflict with Taiwan. As a response, the US moved 20 vessels from the Atlantic to the Pacific fleet in 2007 and more such moves are forecasted. The South China Sea is considered by the US as a natural border China should not cross. It is a strategic passage point between the Indian Ocean and Japan and Korea.
China also has a border issue with Russia. The two countries share a 4300 km border and an important historical confrontational past.
Inside those two borders the major issues about the autonomy of certain regions and peoples – Taiwan, Tibet and Xinjiang for China and a considerably large number of areas in Russia and the adjoining countries in Central Asia that were once part of the Soviet Union. If China has a clear position on this issue – i.e. a total aversion to any such move including with the use of force and population movements – Russia has a more opportunistic stance. It has fought an internal war to prevent the Chechen aspirations to an independent state but intervened military outside its borders in Georgia and is the only country to recognize Abkhazia and South Ossetia as independent states.
Russia fears that its under-populated and vast expanse of territory rich in natural resources, Siberia and the Far East, yields in the face of China’s demography while Russia is in a state of demographic collapse. These two areas have large deposits of hydrocarbons, diamonds, gold and other metals as well as large tracts of forests that provide raw materials to the Chinese paper industry.
Some of the lands forming the region of the Russian Pacific were Chinese until the eighteenth century, and while China has not made any recent claims for their return, Russians fear they may do so.
Russia and China are intent in developing their relations but simultaneously competing for domination of Central Asia and attracting Japanese and South Korean capital to develop the Far East so as not to be exclusively bound to China.
Simultaneously, Russia will redevelop China’s and North Korea’s moribund industry in the adjoining North Eastern parts of the country so as to economically integrate these areas.
Russia also has a contentious issue with Japan that has prevented the signing of a peace agreement between the two countries since the end of the Second World War. It concerns what the Russians call the Southern Kuril Islands, and the Japanese the Northern Territories.
Russia carried out military drills on the islands and announced it would spend over $1 billion between 2016 and 2025 to develop these islands. Japan would like to invest in these islands, particularly in energy projects.
While for many years neither country appeared to think, in spite of speeches to the contrary, that dealing with the other was a priority, Primer Minister Abe’s visit to Moscow in August 2013 seems to have started a different process. One thing Japan needs to avoid at all costs is a coalition between China and Russia.
A dialogue process was started between the defence and foreign ministers of the two countries to discuss measures to combat piracy and terrorism.
Russia’s strengthening of its military presence in the Arctic should also be considered as part of its Asian play, the Arctic being a possible base for ventures in Europe, the American continent and Asia.
Japan also has a territorial issue with South Korea centred around the Takeshima or Tokdo islands, as called respectively by the Japanese and Koreans, that each country claims to be a part of their territory.
These are very small volcanic islands. They are, however, of interest economically as their waters are good fishing grounds and the surrounding waters are believed to contain gas, although none has so far been found. Further, if an international arbiter would rule in favour of Korea, Japan’s case for the Kurile Islands and the Senkaku Islands would be severely affected as the country’s claims in all three cases stems from the San Francisco Peace Treaty that remained vague on this issue.
The Allure Of Winning
The Tokyo 2021 Olympics are in full swing a year off schedule, and still marred by the Covid menace. The stands are mostly empty as Japan is experiencing a surge in new infections due to the delta variant. Now there is warning that vaccine immunity is short-term and will require periodic booster shots.
Olympic organizers, presumably desperate for cash, have developed an anything-for-a-buck mentality. The line between attractiveness and revulsion, tastelessness and vulgarity, followed subconsciously by dress designers is unfamiliar to these officials as evidenced by their mandated dress codes. The German women’s beach handball team refused to wear the ultra skimpy bikini bottoms and appeared in shorts. Celebrities then offered to pay the fines imposed on them.
An American silver medalist in a swimming event ranted and raved about how the race was not clean. The Russian winner displayed grace and the American insisted he had not directed his remarks at the Russian. Then who did he mean? Too bad they no longer have pistols at dawn to encourage restraint in language.
In this surreal Olympics, Russia is supposedly absent. The Russian flag is not displayed and the Russian anthem is not played. It is because the country was accused of a state-wide doping scheme. Yet all the Russian athletes are present competing under the ROC acronym — standing for the Russian Olympic Committee. According to this logic, the athletes were force-fed the doping pills. Perhaps they were …
Nigerian sprinter Blessing Okagbare, a silver medalist at the 2008 Beijing Olympics was suspended after winning a 100m heat in Tokyo when she tested positive for human growth hormone. The hormone builds muscle mass and reduces body fat. After ten other Nigerians were also suspended, the Nigerian Athletic Federation accepted responsibility.
Scandals involving performance enhancing substances are not new. The notorious case of Carl Lewis and Ben Johnson comes to mind. The latter won the 100 meter race at the Seoul Olympics but failed a drug test and the gold medal was awarded to Carl Lewis in second place. It later emerged he had tested positive for banned substances two months earlier at the US olympic trials — a result the US committee chose to ignore. Thus the medal belonged to Britain’s Linford Christie … except he, too, had a colorful doping history. Dennis Mitchell, the next man in line, was later banned for testosterone.
Another notorious case is that of cyclist Lance Armstrong. He garnered seven Tour de France titles and one Olympic medal. Persistent allegations of doping led eventually to an investigation by the US Anti-doping Agency which Armstrong unsuccessfully tried to block through the courts. He was stripped of his seven Tour de France titles and the Olympic gold medal when he decided not to contest the charges. It is possible the numerous eye-witnesses and other cyclists who had admitted doping brought him to reality.
The fact remains that as long as there is the glitter of fame and a good chance they will beat the scheduled tests, athletes are going to be tempted.
Belt & Road ABCs: Analysis of “One Belt – One Road” initiative
Understanding the foreign policy and geo-economic strategies of countries, especially in such a difficult time when national borders are closed and the “militarization” of cybersecurity, becomes an important, if not vital, task for each individual country in its attempts to take its rightful place in building a new world order and development economy.
In the XXI century, it was impossible not to notice the rapid economic growth of Asia, given that the growth rates of each of the national economies of the region exceed those of the Western countries.
For a long time, Asian countries have taken the best of both worlds, building economic relations with China, and maintaining strong ties with the United States and other developed countries. Many Asian states for a long time have considered the United States and other developed countries as their main economic partners. But now they are increasingly taking advantage of the opportunities created by China’s rapid development.
Moving away from Asia, let’s have a quick look what is happening in East Europe, or Central Asia, or Latin America, or even Africa. Most of the countries in these regions are struggling to take their place in “the geopolitical game” in pursuing of the benefits that Chinese investment can bring. But what is the main core and nature of Chinese Investments or Chinese geoeconomic “One Belt – One Road” project? The answer to this question is still unclear for most countries seeking to join. To understand the Belt and Road Initiative, let us also take a brief look at 10 key basics (ABCs) of this initiative:
Why and when was the Belt & Road Initiative (BRI) created?
The Belt&Road Initiative (BRI) – is an umbrella initiative spanning a multitude of projects designed to promote the flow of goods, investment, and people. The new connections fostered by the BRI could reconfigure relationships, reroute economic activity, and shift power within and between states.
The Scope of the Initiative is very big which makes it difficult to clearly identify the main initiative’s goals. Thus, the best way to understand the purpose of the Belt&Road Initiative (BRI) – is to have a quick look on its development phases, each of which has its’ own aim and perspective:
1. Preparation period (1990s – 2000s)
After fruitful economic reforms in China (1970 – 1980s: during Deng Xiaopin’s reforms which pushed forward the transformation of China’s economy), in 1990s with the implementation of the concept of “one country, two systems” (biggest offshore zones Hong Kong and Macao returned under Chinese jurisdiction), the strengthening of Chinese geoeconomics became even bigger. As a result, during 1990s – 2000s financial crises China was the only country with steady currency (while regional stock markets collapsed), being able to provide to the region a platform for further economic boom.
After 2008 global financial crisis it became clear that Chinese stock market is stable and can protect the development of regional economies. China is starting to play a dominant role in the region (shift from “country with closed policy” into regional leader).
2. Conceptualization (2000 – 2012)
While 2000 – 2010 were accompanied by stable economic development (export oriented), the development gap between Chinese regions was getting bigger, weakening the status of a strong regional (and further global) economic power. Due to these Chinese administrations was trying to work on ways to develop less developed regions of the country – started to think on creating a regional integration mechanism within Asia, where China would play the key supplier role. Starting from 2004 China is getting more involved into supplying activities in the region, expanding the production and manufacturing, logistic facilities in low-developed areas of the country (2004 – opening of TRACECA transshipment line; 2008 construction of the transcontinental highway “West Europe – West China”; 2009 construction of gas transportation infrastructure between China and Iran; the early-mid-2010s large-scale transport and infrastructural projects in Central Asia etc).
In 2011, when US Secretary of State H.Clinton proposed the development of a New Silk Road with Afghanistan as a center, Chinese leadership decided to step in and to move from individual projects to a large-scale Eurasian strategy. This decision led to the creation of the BRI.
3. Implementation (2012 – 2017)
The main role of this stage was to build a stable basis of the Initiative, which could guarantee stable economic and infrastructural development. While promoting the BRI, Chinese were concentrating on diversification and facilitation of regions logistics system. Another important element of this stage was the creation of economically strong financial base of the initiative (2013 – launching of the BRI initiative (starting budget USD47 billion), October 2014 – creation of the Asian Infrastructure Investment Bank, Silk Road Fund etc). and Initiative’s promotion (by May 2015 about 60 countries joined the AIIB (decision to join BRI project).
While putting enormous amount of investments into regions’ (mainly ASEAN, Russia, Central Asia) transportation systems, China decided not to lose a profit and export products outside using already existent transshipment routes (through TRACERA, Suez, Malacca straights etc.). As a result, in 2013 – 2015 348 international projects were started, volume of USD24.7 bln, in 2015 Chinese investment increased of 37% compared to 2014 and BRI became a “process – brand”, the period 2016 – 2017, total cost of infrastructural projects is estimated at $ 60 billion.
4. Expansion (2017 – ..)
In May 2017 radical changes in the dimension and nature of the initiative happened:
- initiative is based on transport corridors leading from China to Europe and Africa;
- Continuous flow of FDI to Central Asia, Transcaucasia, Eastern Europe, and the Middle East;
- launched the creation of new markets in countries along transit routes;
- radical changes in approach to FDI protection.
These changes brought certain results into the development of BRI and China itself:
- in 2017 China put an additional 15 billion USD to the Silk Road Fund.
- by the end of 2017 China’s trade turnover with partner countries increased annually by an average of 6%.
- 2019 – 2020 additional $ 8.7 billion has been allocated for the needs of developing countries that were involved in the project.
- Estimated that 4 – 8 trillion dollars will be invested in the BRI project by 2030.
Thus, 2017 played a crucial role in turning the “regional integration initiative” into a new global level one.
To sum up, during Initiative transformation, its’ aims were gradually transforming as well:
- First Phase – to develop an approach for stable economic development of China;
- Second stage – to guarantee country’s positions as stable strong regional leader;
- Third stage – regional integration with expansion to neighboring countries;
- Fourth stage – global expansion and occupation of the geo-economic space of minimum three continents.
Nevertheless, few general aims, which were there from the very first day of BRI’s implementation, can be identified:
- improving intergovernmental communication to better align high-level government policies like economic development strategies and plans for regional cooperation;
- strengthening the coordination of infrastructure plans to better connect hard infrastructure networks like transportation systems and power grids;
- encouraging the development of soft infrastructure such as the signing of trade deals, aligning of regulatory standards, and improving financial integration;
- bolstering people-to-people connections by cultivating student, expert, and cultural exchanges and tourism.
The end result of BRI should be the ceation of a “Community of Common Destiny for Mankind” (人类命运共同体), defined as a new global system of alternative economic, political, and security “interdependencies” with China at the center (zhongguo, 中国). For this reason, Chinese leaders describe BRI as a national strategy (zhanlüe, 战略), with economic, political, diplomatic, and military elements (综合国力), not a mere series of initiatives.
Thus, BRI directly supports many elements of China’s national security strategy. At a macro level, it seeks to reshape the world economic order in ways that are conducive to China’s drive for Great Power status.
What does the creation of the BRI mean in terms of globalization?
While talking on the role of BRI in Globalization trends, its’ global and national scopes (impacts), should be empathized:
Contribution to the “world’s” Globalization:
- Transport and infrastructure development increases trade;
- increasing of connectivity;
- stabilization in monetary policy;
- stabilization of the level of security in the region;
- contribution to the cultural exchange.
Responding to global trends in globalization, based on the principle of mutual benefit and having a far-sighted perspective, BRI has several foreign policy strategic advantages that can contribute to the cohesion of the countries of the 3 main continents (Asia, Europe, Africa) and the disclosure of their economic potential.
Contribution to the “country’s” Globalization:
- BRI is intended to support the development and reform of all provinces and regions in China through involving them into global cooperation with the worlds regions;
- development and connectivity of China’s provinces and neighboring countries;
- contributing to continued strong and sustainable growth in China while simultaneously benefiting from new commercial opportunities (See Attachment 1 below).
Attachment 1: Strategy on “Globalizing” of China
Source: BRI official website, 2015
How does BRI relate to Xi Jinping`s government’s characteristics?
While thinking on BRI as a new trend in Chinese foreign policy, it is worth noting that it was the new way of thinking (and developing of the policy strategy) of The 5th generation of the P.R.C. administration (Administration of Xi Jinping). His predecessors were mainly concentrated on inner policy of China (namely strengthening of Chinese inner market, economy and reducing the “development gap” between the Chinese provinces and cities) and further strengthening of China as regional player (late years of the Administration of Deng Xiaoping). New Administration (Xi Jinping since 2012) decided to take Chinese foreigner policy to next level, announcing the conversation of the doctrine of the “Chinese Dream” (improving of well-being of Chinese people within China) into proper international status (first regional leader, then expansion of BRI into at least 3 continents).
What’s more, no Chinese leader has done more globe-trotting within such a short time (first term 2012 – 2016, second term 2016 – …). Since 2013, president Xi has logged 28 overseas trips that brought him to 56 countries across 5 continents, as well as the headquarters of major international and regional organizations.
As a result of BRI implementation, at least in terms of two of China’s policies – bringing in (qingjinlai) and going out (zouchuqu) – Xi’s first term (2012 – 2016) already marked a new era in Chinese foreign policy. But there was much more to the new era than the flurry of diplomatic visits. Xi introduced four new concepts into Chinese foreign policy: a new type of major country relations (P2P diplomacy, bilateral diplomacy approach, hub-regions integration (ASEAN, CEE etc.), major country diplomacy with Chinese characteristics (strategy of “blue water”, “diplomacy of straights” etc.), a global community of common destiny (strategy “Chinese dream”), and a new type of international relations (BRI).
Further, in 2017, while announcing the start of the expansion phase of BRI, Xi Jinping underlined again the importance of the balanced development of both China and BRI: “Chinese government seeks to
- “ensure and improve living standards through sustainable development”;
- it condones market “reform and opening” (gaige kaifang 改 革 开 放) and
- encourages Chinese enterprises to “go out” (zou chuqu 走出去) especially along the Silk Road Economic Belt and 21st Century Maritime Silk Road (and Polar Silk Road in near future).
Thus, it can be seen, that in 2012 new Chinese Administration (Xi Jinping) noticed that China’s relatively slow growth rate since 2009 has required a rebalancing of its economy away from investment-led growth and towards a more consumption-driven economy. The realization of this fact forced new Administration to think on other possible ways to sustain and develop Chinese economy, which further turn into idea of the creation of new economic integration mechanism in the region (and further continent) – the Belt and Road Initiative. The further phrases of its development have been commonly used in China to indicate the importance of this recalibration.
Meanwhile, because of Xi Jinping new approach of the development of China, the country gained a profound impact on global economic development (which, is safe to say, China has never had before).
Why does China seem to be focusing on African countries?
China is both a long-established diplomatic partner and a new investor in Africa. Chinese interests on the continent encompass not only natural resources but also issues of trade, security, diplomacy, and soft power. China is a major aid donor, but the scope, scale, and mode of Chinese aid practices are poorly understood and often misquoted in the press (since they mainly analyze Sino – African relations only in terms of “what does China gain out of these relations”). It will be fair to emphasize, that few analysis have approached Sino – African relations as a vibrant, two-way dynamic in which both sides adjust to policy initiatives and popular perceptions emanating from the other.
While analyzing the main reasons of the development of Sino – African ties (within BRI or not), it can be underlined that China has four overarching strategic interests in Africa:
1. China wants access to natural resources, particularly oil and gas. It is estimated that, by 2025, China will import more oil worldwide than the United States. To guarantee future supply, China is heavily investing in the oil sectors in countries such as Sudan, Angola, and Nigeria.
2. a huge market for Chinese exported goods, might facilitate China’s efforts to restructure its own economy away from labor-intensive industries, especially as labor costs in China increases.
3. China wants political legitimacy. The Chinese government believes that strengthening Sino – African relations helps raise China’s own international influence. Most African governments express support for Beijing’s “One China” policy (HK and Taiwan, Xinjiang Uygur Autonomous Region are fully Chinese territories), a prerequisite for attracting Chinese aid and investments.
4. China has sought a more constructive role as contributor to stability in the region, partly to mitigate security-related threats to China’s economic interests.
At the same time, African governments are counting on China to ensure political recognition and legitimacy and contribute to their economic development through aid, investment, infrastructure, and trade. To some degree, many African leaders hope that China will interact with them in ways that the United States and other Western governments do not – by engaging economically without condescendingly preaching about good governance, for example, or by investing in high-risk projects or in remote regions that are not appealing to Western governments or companies. Some Africans aspire to replicate China’s rapid economic development and believe that their nations can benefit from China’s recent experience in lifting itself out of poverty.
From what I personally heard from my African colleagues and friends: “we (Africans) prefer to work with China, because if it (China) promises us (Africa) something (i.e. to build a highway or a plant, to invest in solar power facilities etc.) – it will do so, but if the same is promised by the US or Western Europe – we (Africans) will never see the results and furthermore will pay huge percentages and loans for nothing”. Afterall, it makes sense, as Central – East – European countries are mainly willing to cooperate with China because of the same reasons. Thus, it’s not surprisingly that not very high-developed (in terms of economy and infrastructure) countries are tempted to choose Chinese investments, over the Western countries or the WTO.
Thus, BRI, which mainly focuses on the development of large infrastructure projects, is a real hope for many African countries to fill their own infrastructure gap, with less cost and in a more efficient way (so far Chinese companies are top in logistics and infrastructure development and improvement). As a result – as of September 2019, 40 of 55 African countries had signed some sort of memorandum of understanding or other agreement on the BRI.
Africa is also an important end user of China’s industrial overcapacities, particularly coal, cement, steel, glass, solar, shipbuilding, and aluminum, for use in BRI projects.
Also, it must be emphasized another, not necessarily official goal of BRI in Africa – geopolitics and geo-economics. Thus, with the help of African continent, BRI also increases China’s control of critical global supply chains and its ability to redirect the flow of international trade in the world’s sea. Central to these efforts are steps to open up new sea lanes and expand China’s access to strategic ports around the world. Thus, while The Silk Road Economic Belt establishes 6 land corridors (or high-speed train and highways networks, oil, and gas pipelines), connecting China’s interior to Central Asia and Europe, The Maritime Silk Road (and possible Polar Silk Road) further establishes 3 “blue economic passages” knitted together through a chain of seaports from the South China Sea to Africa that also direct trade to and from China. (See Details in Attachment 2).
Attachment 2: Transshipment lines from Far East to Western Europe and Africa
Source : EADB, 2020
African continent is of great importance to the implementation of China’s 13th Five Year Plan, a document adopted in 2016 that provides long-range implementing guidance in five-year increments, which calls for the “construction of maritime hubs” to safeguard China’s “maritime rights and interests” as it embarks on laying a “foundation for maritime Great Power status” by 2020. The centenary of the founding of the People’s Republic of China, 2049, has been set as the year when it will become the world’s “main maritime power” (海洋强国). Accordingly, China’s drive to acquire port access and secure supply lines are likely to intensify alongside the expansion of the Maritime and Polar Silk Roads.
The Maritime trade routes help China diversify its supply chains and create a China – Indian Ocean – Africa – Mediterranean Sea Blue Economic Passage to connect Africa to new maritime corridors in Pakistan, Bangladesh, Sri Lanka, and Myanmar. (See Details in Attachment 2).
But it worth noting, that China’s return on investment from increased port access and supply chains is not only about economics. In five cases (2 of which are in Africa) – Djibouti, Walvis Bay (Namibia), Gwadar (Pakistan), Hambantota (Sri Lanka), and Piraeus (Greece) – China’s port investments have been followed by regular People’s Liberation Army (PLA) Navy deployments and strengthened military agreements. In this way, financial investments have been turned into geostrategic returns. (See Details in Attachment 3).
Attachment 3: Global BRI strategy: roadmap
Source: MERICS, 2020
Within this scenario one can trace the implementation of well-known Chinese geopolitical strategy “string of pearls” and “blue waters”, which is primarily aimed at protecting China’s oil flows, establishing the country as a global Maritime power with diverse interests around the world, and overcoming US attempts to block access to China or its access to the world’s oceans. Due to this strategies Africa (namely Djibouti and Walvis Bay) have a crucial role in this strategy in terms of security.
In this aspect we can see that the African vector of Chinese “diplomacy of straits” is playing a significant part in Chinese foreign policy. In 2016 it was stated that in Djibouti (the African side of the Bab el – Mandeb, connecting the Gulf of Aden (and hence the entire Indian Ocean basin and the Asia – Pacific region) to the Red Sea and further, through the Suez Canal, with the Mediterranean Sea), in the port city of Obock, work on the construction of a naval base of the PRC began. This base will not only enable Beijing to control the Bab – el Mandeb Strait to some extent, but also will serve as a military guarantee of Chinese interests on the African continent, which is (for 2014) $ 210 billions of trade turnover and $ 20 billions of FDI.
The base in Djibouti allowed the Chinese Navy to increase its presence in the Indian Ocean and became a stronghold in the event of an emergency evacuation of Chinese citizens from Africa.
In addition to purely security issues, Africa is also a market for Chinese weapons. From 2013 to 2017, exports of Chinese weapons to Africa grew by 55% compared with the previous five years. From 2008 to 2017, China exported $ 3 billion worth of arms to Africa. Algeria already purchases 10% of all exports of Chinese weapons, including warships.
Thus, Africa’s importance to China in this regard stems from its location in the maritime zone, in which Beijing hopes to expand its presence and project its power. Indeed, ten years ago, China could not penetrate the adjacent waters of Africa. Today, it is estimated that the PLA Navy maintains five battleships and several submarines on continuous rotation in the Indian Ocean. This is set to increase in the coming decades as Chinese rival – India – ramps up its own presence in the area.
What is the significance of the Belt & Road Initiative in Europe?
When the policy of US Presidents D. Trump and later Joe Biden has brought uncertainty to relations between the world’s three largest economic partners – the US, China and the EU, collaboration between official Brussels and Beijing remained one of the most important factors in world politics. Thus, Sino – European relations are one of the primary factors determining the development of the entire system of international cooperation in Eurasia.
Modern relations between the European Union and China are characterized by a comprehensive content of the bilateral agenda, which includes issues of investment, trade, economic, political cooperation, environmental protection, etc. Same principals can be applied when analyzing Sino – European collaboration within BRI.
An important role in these relations is played by the countries of the Eastern borders of the EU – the countries of Central and Eastern Europe. As a kind of geopolitical bridge between Asia and Europe, the CEE countries providing the Chinese side with large platforms for investment and development of trade and economic collaboration. Despite the geo-economic prospects, however, the CEE countries also pose as a considerable threat to the promoting of the BRI project to the West (economically unstable, lack of reliable infrastructure and logistics, high level of political instability and conflicts).
Also, providing a strong basics for development of China – EU ties, Sino – CEE relations, at the same time, bringing higher level of uncertainly and fears to European business and political circles. Thus, while implementing BRI in CEE region and hence strengthening economically and infrastructurally countries of the region, China contributes to shifting of “political preferences and support” of these countries from EU-oriented trends to East-oriented (which in some point can damage European identity and unity).
An important characteristic of Sino – EU relations (which the EU leadership is not fully supporting), is that instead of seeking a “block-based” approach with the whole of Europe, China develops multiple arrangements and memorandums of understanding, resulting in a certain East – West divide, with more Eastern European countries being BRI members. This complicated puzzle of bilateral arrangements ultimately favors a hidden growth of Chinese continuous influence in Europe.
Nevertheless, it can be underlined, that the improving of Sino – CEE ties within BRI requires deep collaboration on the principle of mutual complementarity of economies of the region. Such complementarity provides an important basis for long-term business cooperation, because only in the process of joint efforts to create the BRI will it be possible to fully overcome the underdevelopment of infrastructure in the region. The cooperation between China, the EU and CEE countries can also contribute to the balanced development of Europe.
While talking about BRI from European perspective, the most relevant infrastructural projects of the Initiative are railways and ports. The BRI’s investments in railway and port infrastructure will certainly influence trade relations between China and Europe by lowering transportation costs and increasing trade volumes. New connections will develop trade and have an impact on each European country’s trade turnover with Asia. Thus, it is estimated that “a 10% reduction in railway, air, and maritime costs increases trade by 2%, 5.5% and 1.1% respectively”. Nevertheless, the effects of new connections should also be analysed regarding the specific composition of trade flows.
The maritime route of the BRI then is going to be the most relevant component of BRI both in terms of volume (93% of total trade in 2016) and value (61% of total trade in 2016) of goods in the Sino – European trade. This will reinforce the status of the Mediterranean and Southern Europe as the terminal point of the main BRI shipping route. (See Details in Attachment 4).
Also, the new shift in Sino – EU relations within BRI were intensified by the parallel impact of three concurrent factors:
- expansion of the Suez Canal in August 2015 that doubled the daily capacity of cargo transit;
- emerging “naval gigantism”, or the strategic use by the main shipping companies of huge vessels (between 13,000 and 22,000 TEU) that can only be hosted by the Suez Canal;
- acceleration of global alliances made by shipping companies to reinforce their economies of scale, as in the case of the Ocean Alliance, consisted of the China Ocean Shipping Company (COSCO), CMA CGM from France, Evergreen from Chinese Taiwan, and OOCL from Chinese Hong Kong, which controls 35 per cent of the Europe – Far East route trade and 40 percent of the transpacific route trade.
These three concurrent phenomena (i.e., Suez enlargement, naval gigantism, and global alliances) are progressively reinforcing the competitive advantage of the Europe – Far East route, making it even more convenient than the transpacific route for the Chinese cargo directed towards the American north-eastern coast. These processes provide the European Mediterranean with an unprecedented “centrality” within both of China’s most important trade segments with Europe and the US.
Attachment 4: Projects presented under the EU-China Connectivity Platform. Projects in EU Member States
Source: Five Expert Group meetings held in November 2016 in Beijing, in May 2017 in Brussels, in July 2018 in Beijing, in November 2018 in Brussels, and in July 2019 in Beijing.
Why are there concerns about the expansion of Chinese trade routes? What threats BRI poses to other countries?
1. Environmental risks:
- BRI transport infrastructure is estimated to increase carbon dioxide emissions by 0.3 % worldwide—but by 7 % or more in some countries as production expands in sectors with higher emissions.
- creating bottlenecks in cold waters (Straits of Malacca and Singapore, Suez, Gibraltar, Panama, etc.;)
- interferes in Arctic and Antarctic circles (melting of ice, global warming);
- oil spills (mainly Indian ocean);
- biodiversity loss (mainly South-Asia waters).
2. Social Risks:
- An influx of workers related to an infrastructure project could create risks of gender-based violence, sexually transmitted diseases, and social tensions.
- Increasing of development gap (between world regions and countries).
- Monopolization risks:
- There are examples of Chinese companies using the terms of a contract for financing the construction of infrastructure facilities to obtain, if possible, control over the recipient companies. For example, under the terms of the financing agreement, if the construction and commissioning of the facility is delayed, control of the foreign partner company passes to the Chinese company.
- countries’ technologies degradation (while implementing projects China prefer to use its manpower, raw materials, and technologies).
4. Governance Risks:
- Moving toward international good practices such as open and transparent public procurement would increase the likelihood that BRI projects are allocated to the firms best placed to implement them;
- absence of clear and stable policies transparency;
- interfere in territorial sovereignty of the countries (best example – countries of South-East Asia, Pakistan, Ukraine);
- inconsistency in legal and financial policies due to political instability in countries participants (best example – Myanmar, Russia, Ukraine, Pakistan, Kashmir).
5. Business risks:
- BRI countries have more restrictive and burdensome FDI policies than high-income OECD countries, in terms of starting a foreign business, accessing industrial land, and arbitrating commercial disputes;
- Risk of losing control over project (if country can’t cover the dept – construction company (China) can take over the facility/project/profits);
- corruption risks.
6. Debt Sustainability Risks:
- Among the 43 corridor economies for which detailed data is available, 12 – most of which already face elevated debt levels – could suffer a further medium-term deterioration in their outlook for debt sustainability;
- FDI to projects exceeds country’s GDP (Best examples: B&H, Cambodia, Laos, Greece, Djibouti)
And the last group of risks can be identified in its geo-economic and geopolitical scope (should be noted that this group is a basic of majority of fears about the expansion of the BRI (especially from the EU, the US and Indian perspectives)):
7. Geopolitical and geo-economic risks:
7.1. Geostrategical aspect:
– the project is consistent with the logic of the classical geopolitical Formula: “…who rules Eurasia controls the destinies of the world”;
– creating “fulcrums” within strategical transportation hubs (CEE, ASEAN region, Gwadar, Djibouti etc.) through over the world;
– takes control over Indian Ocean: the realization of the idea of building the Kra – Canal (The Thai Canal through the Malacca Peninsula of Thailand), connecting the Pacific (Siamsky Bay) and the Indian (Andaman Sea) oceans.
– according to the long-standing tradition of the “Chinese box” (foreign policy strategies “string of pearls”, “blue water”, etc.), the main geopolitical goal of the Chinese project is gradually revealed to the outside world:
- 2013 – 2017: gradual opening of foreign policy and economic objectives;
- 2017 – …: entering the path of reaching the main goal (creating a large Eurasian multidimensional space with a huge consumer market).
7.2. Resource’s aspect:
– within Maritime Silk Road (MSR) the construction of oil and gas pipelines from the coast of the Arabian Sea to China’s Xinjiang provides stable oil imports bypassing the Strait of Malacca (hence not controlled by the US and India);
– within Polar SR get access to resources-rich Arctic region (gas and oil);
– within land BRI get access to resources of Eurasia and receive massive discounts on the import of gas (from Central Asia mainly);
– within Polar SR along the Northern Sea Route in the Arctic, facilitate increased resource extraction and cargo deliveries, as well as tourism and scientific opportunities;
– As a result, second quarter of 2021: Total FDI Energy – 44 %, transport – 30% (considering Pandemic impact).
7.3. Military aspect:
– Within MSR places military bases and electronic intelligence facilities in friendly Southeast Asian countries (Myanmar, Cambodia, Thailand, Bangladesh) ;
– the deployment of a naval base and electronic intelligence station in Gwadar (on the Makranska coast of Balochistan (Pakistan)) will ensure the security of oil imports from Iran and control the transportation of oil from the Persian Gulf zone to India;
– the construction of a naval base in Djibouti allows to take under control imports of oil (the Bab – el Mandeb and Hormuz Straits) and gives military guarantees of Chinese interests on the African continent;
– control over South China Sea and partially Indian Ocean (to control oil/gas import).
7.4. Geo-economic aspect:
– A multidimensional model of regional cooperation will expand the geo-economic space for development by forming the following areas (corridors):
1. Transport Corridor,
2. Energy Corridor,
3. shopping corridor,
4. Cyber and Information corridor,
5. Scientific and technical cooperation,
6. Agricultural development,
7. Cultural exchange
8. Increase educational and career opportunities,
9. Tourism Development,
10. security and political interaction.
– BRI, MSR and Polar SR along with the creation of Port outposts in ASEAN, Africa and CEE indicates intentions to take soft “economic” control over the whole of Eurasia and Africa.
Which BRICS members will take more advantage of the new BRI structures?
An obvious winner (from BRICS) of new structure is China. Thus, few aspects can be underlined during the analysis of an impact of BRI on separate nation:
- A large global economy such as China will almost inevitably gain market power through its economic size and its importance as a trading partner;
- Increasing the speed of the extension of use of Chinese goods, technologies and investments abroad (export not only of goods, but factories), gaining power through FDI and “shares” approach;
- In the last quarter of 2020, China’s trade with Belt and Road countries increased by 3.2%, almost 10% points higher than the overall negative growth rate of China’s foreign trade volume;
- BRI is expected to boost China’s GDP by 0.3% every year over a 10-year period, and provide access to new resource-rich markets and trade routes, and reduce its reliance on existing ones;
- Chinese companies are entering the banking, technology, and retail sectors in BRI markets through 3 continents. Globalizing their economy and extending borders of country’s geoeconomics influence.
And that’s only talking in economical aspect, without mentioning the infrastructure, geopolitical impact, and geo-economic and cultural expansion.
Even though it is worth noting numerous benefits for Russia, South Africa (especially considering countries’ poor economic development, unsatisfactory logistics and Russian – Ukrainian crisis), outcomes for Brazil (which is rather distant player) and India (which rather loses than gains from the BRI), China remains the main “BRICS beneficial” of the BRI.
Which countries will benefit the most from the BRI?
As BRI became a “process – brand”, the number of countries which could benefit from the Initiative grew gradually:
- Western Europe and Latin Americaareexpected to gain significantly in terms of economic development. Local companies, especially those involved in trade, logistics and construction, stand to benefit as the region begins to recognize the benefits of being a BRI hub;
- Central – East Europe: Development of energetic, logistics fields allows the region to strengthen its’ position within the EU as an important logistics hub of Europe, at the same time bringing energy Independence for majority of the countries of the region;
- in Africa, as of late 2020, over 90 BRI-linked projects were estimated to be in the pipeline; the USD3.2 billion railway line linking Kenya’s capital Nairobi with its port city of Mombasa on the Indian Ocean is one example of the impact BRI is having on the continent;
- China’s trade with the Middle East has grown over 10-fold between 2000 and 2016 to USD114 billion. And the BRI is expected to further strengthen this relationship, helping raise Dubai’s status as a key access point into the region for Chinese businesses;
- Inthe Central Asia, China is investing USD4.5 billion worth of road, power, and gas pipeline projects in Kyrgyzstan alone. One of the routes through region is a 12,000km-long freight train line that connects China with the UK via Kazakhstan and Belarus, with the potential to cut cargo transit times by half, the China – Europe Railway Express service is already linking dozens of cities across Europe and Asia;
- Major projects in the South Asia include upgrading Bangladesh’s transport links and building ports and power plants in Sri Lanka and Pakistan. Other sizable investments include projects in Mongolia that are worth nearly as much as the country’s 2017 nominal GDP (USD3 billion) and USD5.2 billion to build three airports across Cambodia;
- In ASEAN region, China’s FDI nearly doubling between 2014 and 2017. South Asia and Southeast Asia have received the lion’s share of Chinese outbound FDI to B&R countries. Countries such as Laos and Philippines are expected to benefit significantly – for example, from Chinese funding and technical know-how for the construction of rail links.
Thus, much of the increase in outbound greenfield FDI to BRI countries is concentrated in South Asia, Africa, and Central Asia, while the increase in construction projects is concentrated in South Asia, the Middle East, and Southeast Asia. Even though, so far, the main beneficiary remains ASEAN region, as it is expected to require USD26 trillion in infrastructure investment between 2016 and 2030, or USD1.7 trillion a year, to maintain its growth momentum and BRI helps fund a sizable portion of that.
(See Details in Attachment 5 and Attachment 6)
Attachment 5: BRI’s impact on worlds regions
Estimated BRI investments across 150+ countries from 2020 to 2030. Forecasting model includes core infrastructure, including power, rail, road, ports and water, as well as related activity, including export manufacturing.
Source: Silk Road Associates, 2020
Attachment 6: Main beneficials of BRI
Source: Silk Road Associates, 2020
How has the Covid-19 pandemic affected the progress of the Belt & Road Initiative?
As a person, who used to live in Wuhan and left it 10 hours before the lockdown of the city, I know from own experience how Pandemic can change and influence lives. Nevertheless, must mention, that in politics the affects slightly vary from country to country.
In China they managed to take an outbreak under strictest control relatively fast, but it obviously influenced (and influences) Chinese economy and foreign policy significantly (especially in “lowest” level, considering that country strictly closed its borders to all the foreigners and limited to minimum inter-countries connections).
Moreover, due to the Pandemic restrictions China had to adapt the new BRI strategy in a way, the initiative can still fulfill its mission. Thus, the country implemented a new post-Covid-19 domestic strategy, which further was expanded on big implications for China’s trade with BRI countries. The new strategy was called “dual circulation” (strategy, which envisions a new balance away from global integration (the first circulation) and toward increased domestic reliance (the second circulation)) and implies several simultaneous shifts:
• Strengthening Chinese domestic consumer markets as a source of economic growth;
• Prioritizing domestic high-tech manufacturing and associated services for export;
• Reducing dependency on income from exporting low-value manufactured goods; and
• Reducing dependency on singular sources of imports into China.
This shift could benefit BRI countries, at least in the short and medium term. For instance, currently providing just 4% of China’s imports, African countries may gain from the import diversification and consumer market growth the policy implies.
Thus, the biggest impact pandemic had on the BRI – is an access to Chinese marked and access to China itself. From March 2020 it is extremely difficult to get even the most astute and innovative foreigner businesspeople and their new products into China, especially value-added products. Entrance into China will require considerable relaxation of China’s immigration rules and non-tariff trade restrictions with BRI countries, both of which have yet to be seen in (hopefully) 2021.
But the impact was not only limited to an “access” restriction. Thus, in June 2020 China revealed that 20% of BRI projects had been “seriously affected” by the virus, with up to 40% being “somewhat affected”. That meant that the overall BRI investment dropped by a whopping 50% in the first half of 2020, down from $46bn in the same period in 2019. Due to this numbers (and since China’s internal economy is under great pressure because of Covid-19), Chinese leadership decided it is smarter for the time-being to concentrate more on inner development, rather than massively investing money overseas, so further investment is likely to be thought out much more carefully with a particular focus on profit, something that many BRI investments currently lack. (See Details in Attachment 7).
Attachment 7: Number of construction projects owned by Chinese corporations, 2010-2020
Source: GlobalData, 2021
But this data does not mean that China could not keep BRI lending in high gear, however. BRI loans are just a small part of China’s overall lending portfolio, and China’s main policy banks have enough political backing to bear the cost of upcoming (and those “frozen” due to the pandemic) projects.
Additionally, in addition to the supply shock, Covid-19 has reduced the demand of many countries for BRI investments, not least due to falling energy needs and a decrease in the ability to borrow money.
Worth noting the current usage of BRI transshipment roads to supply other countries with medical technology and medicine to help fighting the Covid-19 outbreak outside of China. Starting from January 2020 government took “medicine field” (especially technologies that use AI and other innovations that monitor Covid-19 carriers) under the strictest control, giving “export rights” only to those enterprises which are checked (quality standards) and authorized. Meanwhile, international e-commerce initiatives in the field of MedTech are also being prioritized to help accelerate economic growth in China.
Investments on energy-related projects outside and inside China were influenced by Pandemic the most. Thus, the drop has hit traditional fuels the hardest. In fact, the first half of 2020 was the first six-month period in which non-fossil fuel-related energy investment (including large hydropower and solar power) dominated BRI energy investments, which further helped to implement the “Greening of BRI” strategies. The turn into “greening” became very resultative in long-tern run point of view (i.e., the EU always underlined that “the BRI is not green enough” to be safely and successfully implemented within Europe). But these trends will become clearer once the dust settles and a global Covid-19 vaccination programme begins.
As for current way to further maintain and develop the BRI, China seeks to share its valuable experience of battling Covid-19 with other BRI countries, one key area of potential will be in projects focused on strengthening the health systems of low-income countries, even if focused on soft processes rather than hard infrastructure.
Also, beyond the short-term, changes to global supply chains will bring new opportunities for diversification through joint activity with other countries. There is also potential for accelerated digital BRI (Digital Belt and Road) activity in relation to Chinese tech companies and private players may now become more active in the BRI.
What are the long-term prospects for BRI? Can the Chinese Belt & Road be considered the beginning of the Asian century?
Exploring the nature of the new geopolitical project, it should first of all be emphasized that it is aimed at radically changing the entire economic map of the world. In addition, many economic experts consider this project as the first shot in the struggle between East and West for influence in Eurasia.
Belt&Road Initiative, based on a multidimensional approach (“five connections”) is promoting mutually beneficial international cooperation. Thus, in contrast to the United States, which relied on the path to world hegemony for neoliberal globalization, China’s foreign policy has taken a course to regionalize international economic relations.
Economically, China will remain the engine of growth for Asia and the world. Its contribution to global growth will rise to over 28% by 2023 (a compound annual rate of 6.1 per cent), according to IMF projections. However, the nature of China’s economic role will evolve along with domestic rebalancing.
The initiative is also projected to boost global trade by 12% impacting more than 65 countries and nearly two-thirds of the world’s population.
Short long-run Sum up:
- BRI is estimated to provide (Globe):
- to raise global GDP by about 4.2 % in 2040, or 9.3% of GDP in 2019-2021;
- up to 56 countries forecast to have their annual GDP in 2040 boosted by more than $10 billion as a result;
- establish over 35 economic corridors to include the following strategic distribution lanes, which will impact the future transport of commercial goods.
- A targeted completion date (100th anniversary of the PRC (2049)):
- China would make several trillion USD dollars’ (4 – 8) worth of investments – in ports, airports, roads, railways (including high-speed routes), bridges and tunnels, as well as power plants and telecommunications networks;
- One of the more notable examples included a clean energy “super grid”, consisting of ultra-high voltage electricity networks linking China and much of the Euroasian continent.
- BRI is estimated to provide (China):
- a competitive advantage in the processing of vessels in the world’s major canals, processing of goods at the major ports of entry;
- the prioritization of the ground transport of goods in key countries’ economic zones;
- ability to leverage port economics within BRI participating ports provides it with a commercial advantage in the global market;
- as China’s industrialization and GDP grow, its exports will start leveling with US exports in the commercial market.
Thus, we can forecast 5 main scenarios (models) of the further development of the BRI:
1. Baseline Model: Continuing the current trajectory equals an estimated US $940 billion in BRI infrastructure investments
If BRI infrastructure investments stay on their current course, the original 65 core BRI countries will continue to see significant investment, as will the recently joined Latin American countries. In this model, while the number of BRI projects will continue to increase, many projects will be of average size and smaller value, which is a trend already in evidence. (See Details in Attachment 8).
Attachment 8: Baseline Model
Source: McKenzie, 2019
2. Global Cooperation Model: Collaboration wins big, totalling US $1.32 trillion in BRI investments
Lessons learned so far, point to collaboration as the win-win BRI solution that reduces political opposition and ensures the highest long-term success rate for infrastructure projects and better access to ongoing multilateral funding. This scenario is based around more formal partnerships between China and external 3rd parties, including other governments and private capital, and BRI-project alignment with the multilateral development banks. (See Details in Attachment 9).
Attachment 9: Global Cooperation Model
Source: McKenzie, 2019
3. Global Sustainability Model: Sustainability becomes a key driver, pushing future BRI investments to US $1.2 trillion
If China adopts a policy of even closer alignment between its BRI goals and sustainable initiatives, it is very likely that it will gain access to new streams of multilateral funding for BRI projects. It will also make Chinese engineering and construction companies more competitive globally to win major clean energy and water project bids as part of BRI. (See Details in Attachment 10).
Attachment 10: Global Sustainability Model
Source: McKenzie, 2019
4. Supply Chain Relocation Model: With tariffs remaining high over a longer-term period, BRI infrastructure projects can still garner an estimated US $1.06 trillion
Ongoing trade tensions between the US and China have led to the partial relocation of manufacturing away from China, including by Chinese companies, to low‐cost countries in Southeast Asia and South Asia. In this scenario the influx of manufacturing sees renewed interest in BRI infrastructure investments in these countries (private and through state-owned enterprises) to support the production relocation. (See Details in Attachment 11).
Attachment 11: Supply Chain Relocation Model
Source: McKenzie, 2019
5. Uni-Polar Model: Global protectionism dampens down future BRI investment, totalling US $560 billion
Fierce, politicised and protectionist competition among countries will almost halve global BRI investments when compared with the Baseline Model (Forecast 1). Of all the five forecasts, this one offers the most modest benefits to all stakeholders. (See Details in Attachment 12).
Attachment 12: Uni-Polar Model
Source: McKenzie, 2019
If we are talking about possible Asian Century, lying at the heart of the regional economy, China will undoubtedly play a central role in Eurasia. Implementing BRI and hence recognizing that multilateralism is the only way to meet our transnational challenges and sustain an open, inclusive global economy, China’s role in Asia and the world will be to uphold the international order while offering innovative solutions to global governance, in line with its responsibility as a major global player.
In the previous phase of globalization, Chinese exports drove global trade as foreign investment came in to help modernize the economy. In globalization 4.0, Chinese imports will play an ever-larger role as Chinese multinationals invest across Asia and the world. From now until 2030, Asia’s consumption growth is expected to exceed that of the US and Western Europe combined.
It is estimated that if fully implemented, BRI transport projects could increase trade between 1.7% and 6.2% for the world, increasing global real income by 0.7% to 2.9% and helping to lift 7.6 million people from extreme poverty in the process. To truly fulfill BRI’s potential, over the coming years, the BRI will shift towards a more multilateral approach.
But to discuss whether BRI’s implementation is the beginning of the Asian Century is not quite right. Moreover, it is still too early to talk about the existence of such at all.
Chinese economy and potential are strong, BRI’s and Asia’s are even bigger, but one needs to understand, that being a locomotive of the new era is not only about having strong economy and development, but about having the high level of stability and security. While some countries in Asia (i.e., China, Japan, South Korea) boast stability, the level of security and stability in the region as a whole is still low compared to the old world (Europe).
Moreover, BRI can be also considered as a new approach of Chinese foreign and domestic policies to adapt to the new trends in worlds geopolitics and disproportionate development of the country itself. In 21st Century, when Chinese Political Economy is observed, it is to be seen that engines of the economy that once led China to development become the very problems that are distorting the development and growth today. Those problems make the “challenges of China” and they are deeply connected to each other making local operations ineffective in long term solutions. Hence, China needs a restructuring in social and economic architecture of the country that will not only enable a grand solution to those challenges but that will also guarantee the stability in domestic affairs. By employing BRI, China aims to achieve peace and harmony in its’ domestic structures regarding economy and society. Therefore, China’s domestic challenges render BRI essential for the survival of a stable China.
Referring to the global scale and importance of the BRI for current China’s existence, it should be noted that the BRI represents a possible integration mechanism in Eurasia, led by China, which unites Asia within its borders, but also has a dangerous asymmetric structure (the size of China’s huge economy and the smaller economies in most of the receiving countries along the BRI). It brings us to the issue of the creation of stable multilateral setting which can tackle not only economic, but security issues in Asia.
History shows that, unlike Europe, Asia was never forced to create a culture of negotiation: while the whole of Europe was twice involved in devastating wars in which it could not win, countries were forced to sit down at the table of diplomacy and negotiation, which ultimately led to the creation of a compromise – Organization for Security and Co-operation in Europe. The countries of Asia, on the contrary, have never been on the brink of survival in recent history, which, as a result, has not forced the countries to create a pan-continental union or a single pan-Asian integration mechanism.
Up to day countries of the region did not create a stable multilateral mechanism which can help them to work out a compromise solution on the issue of legal registration of state borders and territorial claims. Even despite the fact, that Asian countries today are more willing to consult and cooperate with each other on the integration and creating of the zone of co-prosperity issues, nevertheless in Asia, there is hardly a single state which has no territorial dispute within its neighborhood. This issue is one of the most important, since it can guarantee the territorial integrity of States and ensure non-interference in their internal affairs, as well as represent one of the barriers to external threats to their national security, such as smuggling, international crime, extremist and terrorist movements, illegal migration.
Numerous integration mechanisms such as ASEAN, APEC, SAARC or BRI in most cases, are created to jointly solve economic problems, achieve economic integration in the region or sub-regions, but not to tackle security issues.
Economically and potentially strong East today lacks stable political integration and is unable to capitalize (on) its success. To consolidate the total power of Asian countries the largest continent must consider the creation of its own comprehensive pan-Asian multilateral setting, without which it is impossible to establish an Asian century.
Behind the Rise of China is the Centenary Aspiration of the CPC for a Great China
On July 1st, China celebrated the Communist Party’s centenary with a grand ceremony in Beijing where Chinese President Xi Jinping who is also the General Secretary of the CPC made a key-note address to the public. Recalling the “intense humiliations” China suffered for a century before the CPC triumphed against foreign aggression and domestic chaos, Xi vowed that the CPC has and would never permit China to lose its raison d’etre again. One week later, on July 6th, Xi held talks with more than 500 political parties from over 160 countries and the entities to discuss the questions over “how to enhance the responsibilities of political parties to advance the people’s wellbeing.” On both occasions, echoing China’s rapid rise to a global power over the past four decades since 1980, he reiterated that the historic achievements the CPC and the Chinese people have made would not have been possible without the generous support of world peoples.
What Xi has tried to speak out is more than a political token. China has formally realized the first centenary goal—to build a moderately prosperous society, and Xi’s sincere gratitude were also conveyed to political parties, peoples and friends all over the world who have supported and helped the CPC and the cause of revolution, development and reform in China. Given this, the CPC is expected to continue associating the future of the Chinese people with that of other peoples all over the world and advancing China’s development in line with common interests and prosperity of all countries concerned. Accordingly, it is necessary to grasp the essential role of the CPC during its centenary aspiration for a great China.
Historically when the CPC was founded in 1921, China had been humiliated for 80 years by foreign powers of the world—all major powers of Europe, the United States and a rapidly-rising Japan. In reality, China was subjugated under a system of the unequal treaties which could be abrogated by revolutionary means only. Chinese political elites, either the reformed-minded republicans or the conservative monarchists, were all inspired to regain national independence from foreign domination and political freedom out of domestic chaos and poverty. Yet, their efforts failed from time to time. Consequently, the Communists of China grew out of the context and determined to take up the mission. Although the ideology of communism by itself was introduced into China then from the Soviet Russia and Japan as well, it was necessary to try it as the last resort.
Built up on the model of the Soviet Union, the CPC opined three elements as its essential tasks to be achieved for China and its people by all means including forces. As one of the key founders of the CPC, Mao argued for the significance of armed force as he said, “political power comes from armed forces and strategic wisdoms rather than the ideological rhetoric.” Under CPC strategic guidance, the People’s Republic of China (PRC) was founded in 1949 when Mao declared that China stood up, referring to political independence from foreign domination. Yet, the PRC was soon trapped into the Cold War since the world system was featured by the co-domination of the United States and the Soviet Union which remained to the early 1990s. China’s line with the Soviet camp was based on Mao’s words of “leaning toward the one-side” referring to China’s alliance with the Soviet Union. Yet, the ideological allies between China and the Soviet Union became the strategic reality only after the breakout of the Korean War in which China and the United States were engaged into direct fighting.
In fact, Beijing never lost the chances to have contacts with the West including the USA. Since 1955, China and the U.S. began the longest diplomatic talks for 16 years. In addition, China made all efforts to cultivate good relations with the non-allied states while maintaining its strategic links with the Soviet-led bloc. Yet Mao also admitted that the Soviet model was not an ideal one for China to follow economically and socially. In addition, China diplomatically approached all countries as long as they recognized the Beijing government as the only legal one of all China. By the last years when Mao and his senior colleagues had disappeared one by one from the politics of China, the country gradually became a major power such as nuclear weapon, veto power in the UN Security Council, and a relatively huge industrial system. Yet, according to the GDP in general and GDP per capital in particular, China was still a developing country although it has huge potentials—human resources, natural resources and a nation-wide educational echelon—to become a strong power in the near future.
Yet, the dilemma was obvious. On the one hand, China was one of the five nuclear powers in the world, on the other hand, it was also the only developing country among the “Big Five”. Given this, Chinese leader Deng Xiaoping argued in 1978 that poverty could not be associated with China since its people had rights to enjoy the decent, comfortable and affordable lives like those of any country. Followed was the ambitious reform and openness of China to the world. Since then, the CPC has steadily advanced its second mission of national economic modernization which clearly aims to alleviate the poverty of the grass-rooted people of China and enhance its economic strength to the world level, referring to “making China stronger economically and socially”. By 2010, it is widely held that China has achieved its second mission when it was ranked as the second largest economies in the world.
For sure, among the reasons behind the rapid development of China is that the CPC insists on Chinese government to have intervened in the economy since the early days of the PRC. In addition to its famous five-year plans, the first of which started in 1953, the government developed several discrete plans explicitly focused on advancing its technological capability. To that end, the central government has issued a series of industrial policies that function as aspirational goals and combined targets as well. The turning point surely came with the implementation of China’s “medium- and long-term development plan for science and technology” in 2006. In stark contrast to its lackluster execution of previous industrial policies, the central authority has devoted substantial financial and administrative resources to the plan, including a development of 16 “megaprojects,” each under the mandate of a designated ministry, and directed $5 billion to $6 billion to these efforts every year. In 2010, China further unveiled another initiative which designated emerging technologies, such as electric vehicles and next-generation computing, as the drivers of economic growth.
The centerpiece of the Chinese state’s industrial planning apparatus is the “Made in China 2025” plan, which has sine 2015 highlighted ten high-tech industry segments in which Chinese firms should make breakthroughs, and it sets self-sufficiency targets in striking detail. One advisory paper specifies that Chinese semiconductor production ought to reach between 49.10 and 75.13 percent of the domestic market size in 2030. Such specific targets bring to mind the days of China’s planned economy, when the state micromanaged all industrial output. As a result, Made in China 2025 triggered a fierce backlash among many industrialized countries, which were wary of China’s efforts to dominate advanced technology. Having failed to anticipate this reaction, Chinese leaders subsequently tried to dismiss Made in China 2025 as an aspirational planning exercise developed by overly confident academics. But by then, the state had already released a stream of plans focused on advancing select technologies—such as semiconductors and artificial intelligence—as well as enormous proposals for direct subsidies, cheaper access to capital, and investments from public-private funds. Beijing has already showed its keen interests not only in catching up on the technologies but also beyond that. As Xi called on during the two major events: China, under the leadership of the CPC, has brought about a historic resolution to the problem of absolute poverty, and is now marching in confident strides toward the third mandate goal of making China into a great modern socialist country in all respects.
In sum, the historic changes discussed above have made a powerful and far-reaching effect on the development of China. The CPC has acted in response to the evolution of the principal contradiction in the Chinese society, and has promoted coordinated economic, political, cultural, social, and ecological advancement. It has also shown firm resolve in implementing a wide range of strategies for invigorating China through science and education, the innovation-driven development, the rural vitalization agenda in terms of the sustainable development, and the military-civilian integration. This is the Chinese Dream which means a centenary journey towards economic prosperity, national rejuvenation, and peoples’ wellbeing. In light of this, any attempt to divide the CPC from the Chinese people or to set the people against the CPC is bound to fail.
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