Commentary: China's global economic diplomacy on the rise, even if it has not yet arrived

Commentary: China's global economic diplomacy on the rise, even if it has not yet arrived

The One Belt, One Road initiative and the Asian Infrastructure Investment Bank are seen as examples of China's global economic ambitions, but they should not be seen as a challenge to the current global economic system.

SINGAPORE: Officially credited to Chinese President Xi Jinping, the One Belt, One Road initiative can be traced to Bo Xilai, the former minister of commerce and former party secretary of Chongqing who is now serving life imprisonment at Qincheng Prison.

To many observers, the initiative is widely seen as President Xi's signature project.

In his speech delivered at Nazarbayev University in Kazakhstan on Sep 7, 2013, President Xi had proposed to build a “Silk Road Economic Belt” with Central Asian countries. He had also suggested that countries in the region strengthen their policy communication; improve road connectivity so as to form a transportation network that connects East, West, and South Asia; promote trade facilitation; enhance monetary circulation; and strengthen people-to-people exchanges.

This speech is widely cited as the origin of the One Belt initiative.  

In another speech, to the Indonesian Parliament on Oct 3, 2013, Xi had proposed to build the "Maritime Silk Road of the 21st Century" with ASEAN countries and establish an Asian Infrastructure Investment Bank (AIIB) that would give priority to ASEAN countries’ needs.

This speech is widely cited as the origin of the One Road initiative and the AIIB.

BO XILAI’S INITIAL IDEAS

Yet, many ideas in the One Belt, One Road initiative can be concretely traced back to Bo Xilai dating further back than 2013. The “Silk Road Economic Belt” (Sichou Zhilu Jinjidai), for instance, finds its roots in a project called a “New Silk Road” (Xin Sichou Zhilu). The idea for the project was a new railway line connecting Chongqing, Bo's constituency, with Germany through Kazakhstan, Russia, Belarus and Poland. 

Termed the Yu Xin Ou railway, with “Yu” referring to Chongqing, “Xin” Xinjiang, and “Ou” Europe, it initially covered a distance of 11,179 kilometres, and was one of Bo’s pet projects while he was party secretary of Chongqing. A first train left Tuanjie, Chongqing on Mar 19, 2011 and arrived its end destination in Duisberg, Germany 17 days later.  

New silk road 11 (1)

In February 2012 when Bo was still party Chongqing secretary, trade delegations from six countries - comprising Kazakhstan, Uzbekistan, Azerbaijan, Tajikistan, Mongolia and Kyrgyzstan - visited Chongqing for negotiations over the use of the new railway line. In July 2013, Chongqing hosted a major trade fair with the participation of 15 Chinese provinces and 15 countries from Central and Eastern Europe.

“The Maritime Silk Road of the 21st Century” similarly finds its roots in an economic policy under Bo. When Bo was Minister of Commerce, he decided to organise a forum with Pacific island countries as a counter-strategy against Taiwanese President Chen Shui-bian’s charm offensive in the South Pacific.

The Chinese Ministry of Commerce therefore prepared a trip for Premier Wen Jiabao to visit the region and organised a forum - the China-Pacific Island Countries Economic Development & Cooperation Forum - in Fiji in April 2006. In addition to China, leaders from Australia, New Zealand, the Cook Islands, Fiji, Micronesia, Niue, Papua New Guinea, Samoa, Tonga and Vanuatu attended the forum. There, Bo chaired as China’s Minister of Commerce, and Premier Wen gave a keynote address.

The forum produced a guiding framework for economic development and cooperation between China and these Pacific island countries. Unfortunately, Bo's successors did not follow up to develop the initiative after the inaugural forum, after Bo was transferred to Chongqing in late 2007.

"INCLUSIVE AND MUTUALLY BENEFICIAL"

To be sure, the One Belt, One Road initiative has evolved significantly since Bo’s time. According to the Chinese government, the initiative is China’s way of contributing to peaceful development through economic cooperation with various countries in Asia, Europe and Africa along the route. 

Kuwait is constructing the giant Sheikh Jaber Al-Ahmad Al-Sabah causeway to connect the capital with
Kuwait is building the massive Sheikh Jaber Al-Ahmad Al-Sabah causeway to its remote north in an effort to revive the ancient Silk Road trade route AFP/Yasser Al-Zayyat

It does not impose any pre-conditions or geographical restrictions on the projects that can be funded under One Belt, One Road. The initiative is after all meant to be inclusive, market-based and mutually beneficial.

But a keen observer will notice the significant funding set aside to fuel development projects under the initiative. The Chinese government has pledged US$40 billion for the creation of a Silk Road Fund to promote investment in countries and international organisations interested in the initiative.

So it is no surprise that the initiative has been very popular not only among less developed countries such as those in Asia and Africa but also among developed countries in Europe. Around 60 countries have expressed their interest in the project.

This positive reception to the One Belt, One Road initiative stands in stark contrast with the US' critical economic stance towards China. US President Donald Trump had earlier blamed China and the trend of globalisation for the economic woes of the US during his election campaign trail.

The US also does not seem particularly interested in China's One Belt, One Road. At the Xi-Trump summit, President Xi said China welcomed US participation in the initiative but the US gave only non-committal answers. It would be a major diplomatic victory for China if the US expressed interest, but that does not seem likely.

US President Donald Trump (L) and Chinese President Xi Jinping walk together at the Mar-a-Lago
US President Donald Trump and Chinese President Xi Jinping walk together at the Mar-a-Lago estate on April 7, 2017 during their summit. (Photo: AFP)

Yet with the US' withdrawal from the Trans-Pacific Partnership (TPP), China may now wield greater influence over global economic issues, especially with its One Belt, One Road initiative.

ONE BELT, ONE ROAD REINFORCES CHINA’S GLOBAL ECONOMIC DIPLOMACY 

In the past 38 years since China adopted an open-door economic policy, China has been a major beneficiary of existing global economic and financial institutions. As a result of globalisation, China has risen from a closed and underdeveloped economy to become the second-largest economy and the largest exporter in the world.

In recent years, China has grown increasingly influential in the economic sphere, particularly in major international financial institutions. With its 5.09 per cent of total shares in the World Bank, China is now the third-largest contributor to this international financial institution, trailing only behind the US (17.07 per cent) and Japan (7.89 per cent).

With its 6.09 per cent of voting share in the International Monetary Fund (IMF), China is the third-most powerful country in this second international financial institution, after the US (16.53 per cent) and Japan (6.16 per cent).

Since 2016, China’s renminbi has also formed part of the basket of reserve currencies held by the IMF along with US dollar, euro, Japanese yen and British pound. It is the third-largest currency, making up 10.92 per cent of the basket's total weight, behind the US dollar (41.73 per cent) and euro (30.93 per cent).

Most significantly, the Chinese-backed AIIB now has with 52 members and 18 prospective members. China and other BRICS countries - Brazil, Russia, India and South Africa - have also launched a New Development Bank with a capital of US$100 billion.

However, China is far from being a dominant player in the larger global economic system. With a capital of US$100 billion, China’s AIIB holds no comparison to the World Bank of 188 members with a subscribed capital of US$252.8 billion.

If we evaluate the One Belt, One Road initiative more critically against this backdrop, we find that the initiative is an effective example of China's successful global economic diplomacy. But it is by no means a signal that China has arrived.

Based primarily on a web of bilateral cooperative projects, the initiative remains a key prong of China’s global diplomacy strategy in engaging regional countries. But it is not intended to be a challenge to the current global economic system underpinned by financial institutions led by the US and other developed countries.

Nevertheless, the One Belt, One Road initiative summit in May 2017 will be a significant event not only for China but for the world as well, and bears watching.

Dr Bo Zhiyue, a leading authority on China’s elite politics, is founder and president of the Bo Zhiyue China Institute, a consulting firm providing services on China to heads of governments and CEOs of multinational corporations.

Source: CNA/rw

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