Pax Sinica: The travails of a regional hegemon
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Apr 20th 2017
ONCE, HAINAN WAS an alien, pestilential land, beyond the edge of civilisation, to which mandarins who had fallen foul of the emperor were banished. Today China’s island province in the far south is being rebranded as the country’s own tropical paradise. Hainan can also be viewed as emblematic of much of what “China’s rise”, a much-used if often ill-defined phrase, actually means.
A decade ago, when this correspondent first visited the place, cars crept along muddy, potholed roads. Today an expressway whisks travellers from the top to the bottom of the 33,900-square-kilometre island in under four hours—or 82 minutes by bullet train. In the old days the town of Wenchang in Hainan’s north-east was famous for its poached chicken. Today it is famous for a state-of-the-art satellite and spacecraft launch site.
Down the coast, in the middle of a manicured plain, is a convention complex in which China’s leaders each spring host the Boao Forum, often described as Asia’s Davos. The talk is all about “mutual respect”, “win-win” relationships and “common destiny” in Asia. But the billions of dollars for initiatives in the region, including for much-needed infrastructure, come predominantly from China. And the staging of the forum seems designed to convey a sense that Asian leaders and foreign dignitaries are paying tribute to the rulers of a benign imperium.
It is meant to inspire awe, and so too are the luxury hotels going up along the huge half-moon beach outside Sanya in Hainan’s far south. The scale of these resorts dwarfs those in Hawaii or Florida. The subliminal message from Hainan is that “anything you can do, China can do better—and bigger.”
But Hainan also reveals a harder side to Chinese power. Hidden around a headland in Sanya is the Yulin naval base. Enormous caverns have been cut, Bond-style, into the mountainside, big enough to hide 20 ballistic-missile submarines. The harbour is deep enough for aircraft-carriers (at present China has only one of those, but plans to build more).
Sanya is the point in China closest to the edge of the continental shelf and the deeps of the South China Sea. Its strategic importance is obvious. More than half the world’s merchant tonnage passes through the South China Sea. The Malacca Strait takes three times as much tanker traffic as the Suez Canal and 15 times as much as the Panama Canal. China’s sweeping maritime claims—though based on no recognised legal norms, and disputed by neighbours—encompass almost the entire sea.
Over the past three years China has used a rapidly expanding navy and coastguard to enforce its claims to reefs and rocks far out at sea. It has employed dredging fleets to build artificial islands and runways on them. This official policy is backed by unofficial force. In Tanmen, a gritty harbour next to Boao, large trawlers act as a “people’s maritime militia”. They have chased Philippine and Vietnamese fishermen from disputed grounds, poached in neighbours’ exclusive economic zones and, with officialdom turning a blind eye, ravaged the South China Sea’s reefs, destroying the coral to get at rare, slow-growing giant clams for which China’s nouveaux riches pay fortunes.
All this unnerves China’s neighbours (of which more later). Hainan is a microcosm of a wider problem: China wants to be viewed with wonder and respect but, as it grows stronger and more powerful, it as often unsettles as it reassures.
When Deng Xiaoping counselled his compatriots to “lie low and bide your time”, none of them thought he meant for ever. Indeed, it was not long after his death in 1997 that China’s presence increasingly made itself felt abroad. First, the government began to encourage state companies to invest around the world, especially in the mineral resources needed for the country’s growing industrial surge. After a slow start, such investment now runs at about $80bn a year.
A sharp turn in foreign-policy activism, however, came with Mr Xi’s rise to power five years ago. The new territorial assertiveness is part of it. But so, too, is a charm offensive, using economic power as a tool of reassurance.
In 2014 Mr Xi brought together several regional infrastructure initiatives under the rubric of “One Belt, One Road”. The “belt”, confusingly, is a “New Silk Road”: a set of roads, railways and power projects aiming to tie China’s western regions more closely to Central Asia and eventually to Europe. In January, with much fanfare, a Chinese freight service travelled this route all the way from Yiwu, in Zhejiang province, to London. (It took 18 days, with the freight having to change train several times because of different rail gauges, laying bare how much of a work in progress the belt is.) The “road” part of the rubric, equally confusingly, is a “Maritime Silk Road” intended to link China’s landlocked south-west to South-East Asia, the Indian Ocean and beyond.
Part of the idea is to drum up business for Chinese engineering firms that are facing a sharp slowdown and overcapacity at home. But in the main the Silk Road strategies are presented as Mr Xi’s gift to a region in need of infrastructure—the foreign dimension of his “China dream” of a rise to pre-eminence. To finance these projects, a “Silk Road Fund” under the central bank was set up, along with the New Development Bank and Mr Xi’s new multilateral institution, the Asian Infrastructure Investment Bank (AIIB), with a combined authorised capital of $240bn.
“One Belt, One Road” resonates with the historical notion of bringing barbarians under the Chinese heaven. But to many Americans, the Silk Road initiatives, and the AIIB in particular, smack of a powerful new order in the making in which China rather than the United States will call the shots. Barack Obama’s administration urged allies not to join the AIIB. Japan heeded the call; Australia, Britain and South Korea ignored it.
It is easy to overstate the importance of such Chinese initiatives. Arthur Kroeber, in his book “China’s Economy: What Everyone Needs to Know”, reckons that the headline figures for the authorised capital of China’s new financial institutions greatly exaggerate their firepower. The actual combined capital base may be just $40bn-50bn by the early 2020s. That is, admittedly,about the size of the World Bank. But the value of that institution lies less in the money it disburses than in its deep technical and intellectual resources. China’s new institutions cannot draw on anything comparable.
The Silk Road strategy appears to involve extending China’s utilitarian domestic model for infrastructure (under which locals affected by large-scale development are barely consulted) to the wider world. That would be risky. Some Chinese experts worry about an investment frenzy, including from local-level state enterprises with little experience of operating abroad. “Provinces, cities: they all want to go abroad. There is disorder,” says Ding Yifan of the State Council’s Development Research Centre in Beijing. Other researchers in Beijing warn that little thought has been given to the political risks and security concerns involved in putting Chinese projects and workers in brittle countries in Central Asia, or in the $50bn China-Pakistan Economic Corridor, a set of infrastructure projects in Pakistan launched by the two governments amid much publicity in 2015.
Andrew Small, an expert on China-Pakistan relations at the German Marshall Fund, in a recent article warned of the shortcomings of the approach. One of them is lack of transparency. Even Pakistan’s central-bank governor says he does not understand where all the trumpeted money is coming from and how it is being spent. Another is insufficient regard for grassroots support and for the social impact of projects. Chinese leaders do not need to pay much heed to this at home, but in a poor and insurgency-torn region such as Balochistan it could be explosive. “Chinese officials still lack the instinct to take measures of this sort,” Mr Small concludes.
In their open-handed approach to China’s periphery, Mr Xi and his fellow leaders have America in mind. They hope that countries brought into China’s developmental embrace will feel less willing to remain part of the American-led order of regional security. Yet buying power is not that simple. Closeness to local elites can stir popular hostility. In Myanmar in 2011 resentment of China’s outsized commercial activities, and the small number of generals benefiting from them, influenced even the military regime, leading the president, Thein Sein, to halt construction of a huge dam the Chinese were building. A weakened junta subsequently ceded much of its power to a democratically elected government. Chinese influence in the country has not recovered.
In Sri Lanka, from the mid-2000s China bet everything on the then president, Mahinda Rajapaksa, and his family. But murky Chinese loans and investments contributed to Mr Rajapaksa’s unexpected failure to be re-elected in early 2015, which came as a shock to China. In Malaysia, China recently helped with a multi-billion-dollar bail-out of a heavily indebted state investment vehicle, 1MDB. That got the prime minister, Najib Razak, out of a pickle, but many Malaysians do not want to see their country in hock to China, and Mr Najib’s troubles may not be over yet.
Evelyn Goh of the Australian National University says China has two blind spots in its dealings with smaller neighbours. The first is that it struggles to recognise what she calls their “autonomous agency”, ascribing any behaviour it dislikes to malign American influence. The second, more broadly, is its failure to understand that its aggressive behaviour, such as in the South China Sea, undermines its development diplomacy. That dissonance between its growing power and its lagging status risks adding to the sum of Chinese dissatisfactions.
