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East Asia 2036

Posted By on September 19, 2016 @ 14:30


Earlier this year PwC reported [1] it had identified ‘the equivalent of US$250 billion in projects… [which have] been built already, recently started construction or have been agreed on and signed’ related to China’s One Belt One Road (OBOR) initiative. OBOR is a massive undertaking with two fundamental components. The maritime ‘road’ strategy is focused on developing ports in the Indian Ocean [2], the coast of Africa [3] and the Mediterranean [4].  The ‘belt’ involves investment in infrastructure cooperation in a zone that stretches from Xinjiang (the north-western part of China) to the Baltic Sea.  These activities will have consequences for East Asia that go beyond trade and will shape the strategic environment in coming decades.

The scale [5] of the initiative is impressive. A European Parliament report estimate [6]d that it could involve, ‘an area that covers 55% of world GNP, 70% of global population, and 75% of known energy reserves’. The vision and framework [7] for the initiative were released by the Chinese Government in March 2015 and it emphasises cooperation between China and the countries involved in ‘policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds’. If even partially successful, China will eventually sit at one end of ‘a massive trade network reaching from often neglected central Asia to Central Europe [8]’. As of May 2016 [9] China held US$3.19 trillion in foreign exchange reserves and US$746 billion in its sovereign wealth fund. With US$890 billion worth of deals [10] officially in train, ‘the massive trade and investment effects across Eurasia could well reshape a significant part of the global economy’ [8].

But the sheer size of China’s ambition has led to arguments for caution [11] about its prospects. Optimists tend to ‘underestimate the obstacles for China’s OBOR initiative both inside and outside of China’ while there’s been an ‘exaggerated concern on the part of those fearing a more powerful China’. Some reports [12] indicate investors are ‘skeptical about whether the financing will be available’. Nevertheless despite widespread recognition of the ‘daunting challenges [13]’ OBOR faces, China’s progress to date has impressed.

Apart from the possible economic benefits from the investment in OBOR, significant success would see China reap strategic [14] and security benefits. OBOR can be seen [9] as a response to the US pivot to Asia and more directly as ‘addressing security challenges on its western periphery as well as energy security issues’ [15]. Not least is the enormous strategic and operational depth that both China and Russia will gain from having secure rear areas. Russia would benefit by being able to concentrate on NATO and Europe and China could exploit if it came to fighting a war of attrition with the US alliance in East Asia.

And China and Russia are growing closer. To understand the future East Asian environment, it’s important to understand the strategic implications of developments between Sevastopol on the Black Sea and Zhanjiang on the South China Sea. On 24 July Chinese Foreign Minister Wang Yi identified Russia as China’s most important partner [16], adding ‘China and Russia are developing the comprehensive strategic coordination as a strategic principle, rather than any expediency’. At the same meeting Sergei Lavrov said cooperation with China is Russia’s major foreign policy orientation’. Putin [17] has spoken of ‘a comprehensive partnership and strategic collaboration’ with China.

The slow [18] and cautious [19] rapprochement between Russia and China has been gathering pace since the 1990s. OBOR represents common ground given their shared ambition to gain more international influence and to limit the influence of the US at the global and regional level. Their preference [20] for a multipolar world order, ‘where the actions of the great powers are determined by their national interests and the maintenance of their sovereignty [19]’ rather than universal norms will be progressed by OBOR [21]. Russians acknowledge that OBOR is complementary to their own Eurasian Economic Union (EEU) initiative. Russia and China have signed [8] major energy, resource and transport investment agreements recently.  OBOR is ‘is both an exercise in diplomacy as well as an attempt to alter the way one looks at the global economy and the balance of power [8]’.

China will also strengthen its global political and economic influence and build its ability to exercise soft power and pursue foreign policy goals. Involvement in OBOR by numerous multinational bodies [9], including the Shanghai Cooperation Organisation, ASEAN, the Asian Infrastructure Investment Bank, the European Investment Bank, and China’s membership in the European Bank for Reconstruction and Development will further embed its influence in international affairs.

Some commentators are recognising that China might be providing a viable alternative to the liberal international world order [22]. China is making clear that there are no political preconditions for involvement in OBOR [1]. Unlike many post-World War 2 international bodies that impose conditions around free market reforms [23] and the adoption of liberal democratic practices [24], China offers cooperation without interference. For many commentators the challenge to what’s described as the Western hegemony [25] is already under unparalleled pressure which OBOR can only increase.

The whole strategic game in East and Central Asia and even Europe may have changed in 20 years’ time and in large measure because of OBOR. The grand Chinese plan will face many challenges, problems [26] and obstructions and, while it may fall short, it’ll inevitably have an impact. Even if doesn’t deliver everything it promises, it’s likely to irrevocably change the strategic landscape, and we need to recognise and plan for it.

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URLs in this post:

[1] PwC reported: http://www.pwc.com/gx/en/issues/high-growth-markets/publications/china-new-silk-route.html

[2] Indian Ocean: http://thediplomat.com/2016/05/chinas-jewel-in-the-heart-of-the-indian-ocean/

[3] the coast of Africa: https://www.chinafile.com/china-africa-project/chinas-ambitious-new-silk-road-trade-route-takes-shape-africa

[4] the Mediterranean: http://www.wsj.com/articles/china-cosco-to-invest-over-552-million-in-port-of-piraeus-1467789308

[5] The scale: http://www.ey.com/CN/en/Services/Specialty-Services/China-Overseas-Investment-Network/EY-navigating-the-belt-and-road

[6] A European Parliament report estimate: http://www.ecfr.eu/page/-/China_analysis_belt_road.pdf

[7] The vision and framework: http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html

[8] a massive trade network reaching from often neglected central Asia to Central Europe: http://thediplomat.com/2016/08/chinas-road-to-closer-ties-with-russia/

[9] May 2016: http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/586608/EPRS_BRI(2016)586608_EN.pdf

[10] US$890 billion worth of deals: http://tribune.com.pk/story/1153068/investing-new-silk-road/

[11] arguments for caution: https://www.cigionline.org/sites/default/files/hongying_wang_mar2016_web.pdf

[12] reports: http://www.asiabriefing.com/news/2016/01/asian-financial-forum-highlights-tpp-development-one-belt-one-road-asian-growth-2016/

[13] daunting challenges: http://cwp.princeton.edu/news/top-5-accomplishments-chinese-diplomacy-2015

[14] strategic: http://www.aspistrategist.org.au/the-bay-of-bengal-the-maritime-silk-route-and-chinas-naval-ambitions/

[15] energy security issues’: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2015/04/WPM-59.pdf

[16] identified Russia as China’s most important partner: http://news.xinhuanet.com/english/2016-03/12/c_135180183.htm

[17] Putin: http://rbth.com/international/2016/06/23/putin-about-xi-he-is-a-very-good-friend-and-a-reliable-partner_605481

[18] slow: http://carnegieendowment.org/files/Trenin_CER_Eng.pdf

[19] cautious: http://www.foi.se/en/Search/Abstract/?rNo=FOI-R--4087--SE

[20] Their preference: https://www.ciaonet.org/catalog/34094

[21] be progressed by OBOR: https://www.scribd.com/document/267511978/Toward-the-Great-Ocean-3-Creating-Central-Eurasia

[22] a viable alternative to the liberal international world order: http://www.swp-berlin.org/fileadmin/contents/products/research_papers/2016RP02_gdh.pdf

[23] free market reforms: http://journals.gmu.edu/newvoices/article/viewFile/14/14

[24] liberal democratic practices: http://www.the-american-interest.com/2015/04/09/the-paradox-of-american-democracy-promotion/

[25] Western hegemony: https://scholar.princeton.edu/sites/default/files/gji3/files/the_future_of_liberal_world_order-sept_2015_0.pdf

[26] problems: http://www.economist.com/news/china/21701505-chinas-foreign-policy-could-reshape-good-part-world-economy-our-bulldozers-our-rules

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