China’s checkbook diplomacy and latest means of gaining political support may compromise sovereignty in the Indo-Asia-Pacific region
FORUM Staff | PHOTOS BY REUTERS
nstead of traditional coercive or hard power approaches, China is increasingly using economic and diplomatic levers to influence the behaviors of nations in the region. Its concerted strategy combines an ever-expanding definition or brand of soft power with public initiatives to advance its interests and image. Although smaller, developing nations in the Indo-Asia-Pacific region may be more susceptible to such Chinese charms, the widespread use of such tactics that employ everything from state-owned enterprises and media groups to private industry and cultural organizations is increasingly troubling to some people.
Consider Australia, where in the past decade China has gone from making almost no investments to emerge as the fifth-largest source of foreign direct investments (FDI) in 2016, according to an analysis by East Asia Forum online, a policy forum at Australian National University. Chinese investors have bought farmland, utilities and other properties and even leased the Port of Darwin for the next century, according to media accounts. Private companies such as the Yuhu Group have donated millions to Australian universities to establish centers for Chinese culture and art. China’s Communist Party has funneled money to both of Australia’s main political parties, think tanks, media companies, universities, schools and hospitals, as the Australian Financial Review website, www.afr.com, reported. One visible consequence is that every month Australian readers can now find an eight-page version of China Daily, the state-controlled newspaper that details the Communist Party line, inserted in Australia’s major newspapers, various media reported.
Individually, many of these investments may seem innocuous — even beneficial — until they are viewed in a larger context, some experts and policymakers said.
Concern over such financial contributions erupted in Australia in September 2016 when a senator from the opposition Labor Party disclosed he accepted a donation from a Chinese company, as The New York Times newspaper reported. The incident raised alarm over growing foreign influence in Australian politics.
The foreign donation pushback stems from deeper concerns about the broader ramifications of Chinese acquisitions and investments in Australia and the realization that such investments may be part of a carefully orchestrated campaign to promote China’s strategic interests, some experts said
“We have to assume that there is a larger strategy by the Communist Party to shift domestic public opinion in Australia on sensitive issues such as the U.S. alliance and the South China Sea,” Rory Medcalf, who heads the National Security College at the Australian National University, told www.afr.com in September 2016. “The long-term goal is to make Australia less likely to oppose China in regional confrontations.”
China seems to be using a similar strategy to string together deals across the Indo-Asia-Pacific and the world that when taken collectively could potentially be very influential. China has pledged to invest an unprecedented U.S. $1.25 trillion worldwide by 2025, according to Foreign Affairs magazine, through such vehicles as the Asian Infrastructure Investment Bank (AIIB); the New Development Bank, which is a project with Brazil, Russia, India and South Africa; and the country’s “One Belt, One Road” plan to integrate trade and investment in Europe and Asia through transport links along the new Silk Road. By increasing such financial investments, China is striving to influence countries to take its side in regional controversies and confrontations, some observers contend.
Inroads in Southeast Asia
In July 2016, for example, Southeast Asian nations could not reach a consensus on maritime disputes in the South China Sea, various media reported. Although an arbitration panel at The Hague ruled in the Philippines’ favor and denied China’s broad claims to the passageway under the U.N. Convention on the Law of the Sea, the 10-member Association of Southeast Asian Nations (ASEAN) did not issue a joint statement on the international ruling because Cambodia opposed mentioning the verdict. ASEAN members including Brunei, Indonesia, Malaysia, the Philippines and Vietnam have staked competing claims to portions of the sea, through which U.S. $5 trillion in global trade travels each year.
The Philippines and Vietnam pushed for an ASEAN statement in support of the ruling and international law, Reuters reported. Cambodia, however, supported China’s opposition to “any ASEAN stand on the South China Sea, and its preference for dealing with the disputed claims on a bilateral basis,” Reuters reported. China pledged U.S. $600 million to Cambodia days before the ruling, according to The Associated Press.
There is only one other time in ASEAN’s nearly 50-year history that the organization could not agree to the wording in a statement after a major meeting due to a lack of consensus. In 2012, Cambodia also blocked ASEAN from including language about the South China Sea in a statement, according to Reuters.
Curtis S. Chin, Asia fellow with the Milken Institute, explained it this way to www.voa.com: “For Cambodia, China is its most significant partner. Each nation is seeking to advance their own interest, [and] Cambodia is getting tremendous amounts [of] money from China.” China continues to increase its investments to Cambodia and funds nearly a third of FDI there, according to the 2016 ASEAN Investment Report, published by the ASEAN Secretariat and the U.N. Conference on Trade Development. China has contributed more than U.S. $11 billion to Cambodia in direct charity and soft loans over the past 20 years, according to analysts at the Wharton School at the University of Pennsylvania.
China, meanwhile, “just like every other country in the world, through its development assistance, through its diplomacy, through its soft power … is really trying to advance, understandably, its own national interests,” Chin said.
China’s increasing investment across the region has the potential to undermine sovereignty of nations in the longer term, some experts caution. Nations should examine whether efforts that undermine ASEAN or other collective security institutions ultimately work in a given country’s favor despite the allure of investment dollars, they say.
China has increased the flow of money into other ASEAN countries, although it is not considered a major investor overall. Chinese FDI to these nations burgeoned from U.S. $600 million in 2003 to more than U.S. $8.2 billion in 2015, according to the 2016 ASEAN report. Besides its investments in Cambodia, China is the largest investor in Laos, accounting for 62 percent of FDI there. China continues to increase FDI to Indonesia where it has been among the top 10 investors since 2014 with more than half of its investments targeting energy and mining extraction, according to The Jakarta Post newspaper. Exact figures and data on China’s investment and aid programs throughout the region are often hard to track overall, analysts said, largely because of transparency issues. Many speculate, however, that China is actually the largest investor in Indonesia, given that Chinese investors often invest in other countries via proxy companies based in other countries such as Singapore, The Jakarta Post reported. Meanwhile, Burma owes nearly half of its U.S. $10 billion debt to China.
In addition to recently blocking a consensus among ASEAN nations, China’s investments in member countries seem to have tipped the balance of trade in its favor in the past decade. Since the ASEAN-China Free Trade Area (ACFTA) was created in 2010, ASEAN’s goods trade with China went from a surplus to a U.S. $45 billion deficit in 2013, according to a 2015 study by the U.S.-China Economic and Security Review Commission of data from the China Ministry of Commerce. “The causal link between ASEAN’s deficit and ACFTA merits scrutiny,” the report found.
Pacific Islands Pressure
China is also increasing its engagement and investment in Pacific island nations. It has diplomatic relations with the Cook Islands, Federated States of Micronesia, Fiji, Niue, Papua New Guinea, Samoa, Tonga and Vanuatu. Between 2006 and 2013, China has emerged as the fifth-largest donor in the region, donating more than U.S. $1.47 billion since 2006, according to the Lowy Institute for International Policy website. Australia remains the region’s largest donor, contributing U.S. $6.8 billion in aid during the same period. The U.S. ranks as the second largest donor, contributing about U.S. $1.7 billion for that period.
In the 2013-2014 time frame, China pledged to make more than U.S. $2 billion in loans available to Pacific island nations, half of which would be concessional. It also promised to reduce tariffs on imports from Pacific island nations.
Thus far, as much as 78 percent of loans by China to Pacific island nations have been concessional, according to Philippa Brant, an expert in Chinese aid in the Pacific and former research associate at the Lowy Institute, as reported by the Radio New Zealand website. This often means Chinese contractors perform the related infrastructure projects such as building roads and hospitals, she said. Moreover, they often import workers from China to carry out the contracts.
Chinese concessional loans to Tonga, for example, present challenges. Tonga owes about 60 percent of its debt or roughly U.S. $110 million to China’s Export-Import Bank. The amount is equivalent to about a quarter of its gross domestic product. The Tonga administration that held power from 2006 to 2010 and racked up the debt had hoped “China would write off the debt,” according to the Radio New Zealand website, but China has declined to do so.
Some observers, however, wonder what China will ask for when loans to Pacific island nations can’t be repaid. Some suggest China will expect indebted nations to vote with China in the U.N. or demand to be paid in resources or to relinquish control of strategic assets such as Tongasat, Tonga’s telecommunications company.
Pesi Fonna, editor of Mantangi Tonga magazine, told the Nikkei Asian Review online that Tonga will be tied to China as a result of the debt. “[It] is clear that the increasing role and influence of China in Tonga today, basically, revolves around finding ways for how Tonga might repay its loan to China. It is a debt collector’s influence, and Tonga has no option but to satisfy the demands of the debt collectors,” he said.
Steven Ratuva, director of Canterbury University’s Macmillan Brown Center in Christchurch, New Zealand, said China perceives Tonga as more susceptible to its influence than larger islands such as Fiji. “Tonga is the place they are really going to have much more substantial control, and they need this in the Pacific,” he said. “The Chinese deny they have a grand plan, naturally you have to deny it, but they will wait for 20 or 30 years. … The more aid they give, the more vulnerable [Pacific islands] become.”
Indeed, larger islands may also be vulnerable. Chinese aid to Fiji soared after Chinese president Xi Jinping visited Fiji in November 2014 and pledged to increase development loans there. Chinese companies have bought up mining rights on Fiji. Zhongrun International, for example, owns controlling shares if Fijis’ Vatukoula gold mine, according to The Economist magazine.
In addition, China runs Papua New Guinea’s U.S. $1.6 billion Ramu nickel mine, The Economist reported.
Despite the growing outlays of cash, the degree to which many of China’s soft power initiatives have succeeded in the region to date remains in question.
“China’s soft power has been fairly effective in Cambodia. In Australia and New Zealand, China has had some success, but that has usually been knocked back by revelations like the most recent ones in Australia about members of parliament receiving donations from China,” Michael Jonathan Green, senior vice president for Asia and Japan Chair at the Center for Strategic and International Studies (CSIS) told FORUM.
“Soft power is usually initiated by civil society and not the government. In open democratic societies, China’s more propagandistic edge has turned off readers or viewers of their material. China has more success in less open societies, but many of these (Vietnam, for example) have confronted China’s hard power,” Green said.
Scott Harold, associate director for the Rand Corp.’s Center for Asia Pacific Policy, went further, telling www.voanews.com that some countries resent China’s approach. “When Beijing says jump, and your only right is to ask how high, [it] is not very well appreciated. … It may very well be a reality that some small states are takers in the international system. But it’s not something they like.”
China’s economic successes have attracted admirers, however. “I think China gets a lot of soft power from its astonishing record economically, raising hundreds of millions of people out of poverty. A lot of people admire that. That produces soft power,” Joseph S. Nye Jr., university distinguished service professor at Harvard University’s Kennedy School of Government, told a CSIS forum.
“China does better in Africa and Latin America than it does in its own neighborhood in Asia. Because China has problems with so many of its neighbors, Japan, India, Vietnam, the Philippines and so forth, that makes it hard to generate a lot of soft power there,” said Nye, a former U.S. assistant secretary of defense and chairman of the U.S. National Intelligence Council.
In the aftermath of the Cold War, Nye introduced the term soft power in his 1990 book Bound to Lead: The Changing Nature of American Power. Observing a shift in focus from raw military might, Nye described soft power as the influence the U.S. embodied through less tangible qualities, such as its cultural heritage, human values, technological innovation and political ideals.
Some two decades later, China became interested in the notion of increasing its influence without using force or coercion. In 2007, then-President Hu Jintao first pushed for China to increase its soft power. In 2014, President Xi Jinping reiterated the drive. “We should increase China’s soft power, give a good Chinese narrative, and better communicate China’s messages to the world,” he said, according to Foreign Affairs magazine.
“They know that, for a country like China, whose growing economic and military power risks scaring its neighbors into forming counter-balancing coalitions, a smart strategy must include efforts to appear less frightening. But their soft-power ambitions still face major obstacles,” Nye explained in July 2015 on the Project Syndicate website, a forum for informed public debate. Namely, China’s leading challenges include its intense nationalism and its tight government control, he wrote.
In addition to President Xi increasing his visits to foreign countries, some of China’s soft power tools include the government’s expansion of its state media organizations including its Xinhua news agency overseas, creation of more than 500 Confucius Institutes around the world to promote study of the Chinese language and culture and encouragement of hundreds of thousands of foreign students to study in China. It has also increased the number of international events it holds including sponsoring the summer 2008 and winter 2022 Olympics in Beijing and the G-20 summit in Hangzhou in 2016 as well as myriad conferences.
China, more than the U.S., has expanded the concept of soft power to include economic resources in its adaptation of the strategy, other analysts contend. “Not only is Chinese soft power inclusive of economics, it actually is the most fundamental, durable and influential feature of this power. For rating purposes, we can say that Chinese soft power largely rests on its economic power, and it secondly places its strength on its foreign policy ideas and political values followed by its culture and civilization — these being the least developed aspects of Chinese power,” graduate student Afsah Qazi explained on the independently-run website International Policy Digest.
Various studies show, however, that China’s soft power, as traditionally defined to exclude economic and military power, has not been increasing on the whole. “Polls in North America, Europe, India and Japan show that opinions about China’s influence are predominantly negative,” Nye wrote in a commentary published on the Project Syndicate website in July 2015. China’s practices such as importing labor remain unpopular even in Latin America and Africa, where it doesn’t have ongoing territorial or human rights disputes, Nye wrote.
China may spend as much as U.S. $10 billion each year on “external propaganda,” according to David Shambaugh, a professor of political science and international affairs at George Washington University, writing in Foreign Affairs. Even so, “China’s favorability ratings are mixed at best, and predominantly negative and declining over time. They have dropped fully 20 percent from … 2009 to 2015,” he told a recent CSIS forum on China’s soft power on the basis of a series of public opinion surveys conducted around the globe in recent years.
Perhaps the results of two recent elections are better indicators of how the Communist Party’s charm initiative is faring and what nations really think of China’s soft power assertions across the region. In January 2016 in Taiwan, voters elected a president whose party seeks to diversify trade relations and lessen its dependence on China. In Hong Kong, the elections in September 2016 revealed the lack of public favor for the values of the Communist Party in the region. In a record turnout, voters picked candidates for their new legislature who advocated democratic rights. They even elected some leaders who support Hong Kong’s independence or at least its long-term autonomy.
Although China has had limited success in increasing its soft power, in terms of traditional definitions, the manner in which it conducts its checkbook diplomacy and uses cash to supplant its public initiatives remains a growing concern for regional security, some experts maintain, especially because of the close link historically between economics and politics in China. Nations must grapple with reaping the benefits of Chinese investment without compromising self-interests or even sovereignty, given the resulting political pressure that such investments appear to ultimately entail.