November 15, 2016

Commentary

The Belt and Road Initiative and the US-China Relationship

By Alek Chance

Publications

The Geopolitics of China’s Rise in Latin America
Ted Piccone 

Brookings, November 2016

This report addresses some questions over the increasingly influential role that China is playing in Latin America. It suggests that China’s growing influence in the region has three implications: 1) it reflects the existing discontent of the US-led liberal order among Latin American states, 2) that Latin America is maximizing their benefits by feeding Chinese and US competition, and 3) that the US has not abandoned its security interests in the region.

Power and Order in the South China Sea
Patrick Cronin

Center for a New American Security, November 10, 2016

This report outlines four frames of reference for understanding the multidimensional interests in the South China Sea. Cronin argues that the importance of the South China Sea lies in its role as the locus of geostrategic competition, the foundry of norms and standards, the testing ground for US military capability, and the economic epicenter of regional resources. He suggests that the US should actively engage in the South China Sea with its regional partners to use its geo-economic tools to advance a holistic economic, diplomatic, and legal approach to this issue.

China’s ‘One Belt One Road’ Is a Big Deal. So What Is the Role for Beijing’s Military?
Lyle Goldstein


The National Interest, November 20, 2016

Goldstein claims that the Maritime Silk Road, a crucial part of China’s ‘One Belt One Road’ initiative, has a military dimension that has gone unnoticed. He argues that Chinese military writings have indicated its tremendous interest in MSR suggests that the next administration “should look favorably on the MSR and attempt to guide it in a constructive, inclusive, environmentally sensitive, and demilitarized direction.”

Deciphering Trump’s Asia Policy
Mira Rapp-Hooper
Foreign Affairs, November 22, 2016

Rapp-Hooper sees two sources that may predict Trump’s foreign policy: his campaign promises and the writings of his closest national security advisers. These sources indicate that Trump’s future Asia policy may either be retrenchment or unilateralism. Regardless of what his policy may be, she concludes that the deep uncertainty will cause turbulence in Asia’s regional balance of power in the short term.

The Military Balance in the Koreas and Northeast Asia
Anthony Cordesman

CSIS, November 22, 2016

This report, excerpted from a longer book, examines the military balance in the Korean Peninsula and the influence of key outside powers, including the US, China, Japan, and Russia.

Mischief Reef: President Trump’s First FONOP? 
Bonnie Glaser and Zack Cooper 
CSIS, November 30, 2016

Glaser and Cooper consider a potential US Navy freedom of navigation operation (FONOP) challenging entitlements related to Mischief Reef, and notes that the next FONOP could happen shortly after Trump’s inauguration given the current schedule. While the authors understand the importance of FONOPs, they warn observers and the Trump administration of the dangers of equating FONOPs with efforts to reverse Chinese reclamation, construction or militarization of the Spratly Islands.

Views from the G2: Public Opinion in the US & China 
Karl Friedhoff and Craig Kafura
The Chicago Council on Global Affairs, December 1, 2016

This survey on public opinions in the US and China indicate that both American and Chinese people prefer the US and China to share leadership in global governance and view stronger economic relations as beneficial. The study also shows a high level of distrust between the two societies.

The United States Can No Longer Overlook Asia’s Re-emerging Great Powers
Douglas Paal 

Carnegie Endowment for International Peace, December 1, 2016

Paal argues that the Trump administration will be facing a new situation characterized by the re-emergence of regional great powers, most notably China, India, and Russia. He urges the next president to accommodate our policy to fit with these rising geopolitical challenges and avoid repeating past mistakes.

The Real Risk behind Trump’s Taiwan Call
Evan Osnos
The New Yorker, December 3, 2016

Osnos discusses some of the events surrounding the Trump-Tsai phone call and evaluates whether the president-elect was intentionally provoking China, manipulated by confrontational advisors, or simply does not understand the diplomatic protocols surrounding cross-strait relations. Whatever the reason, Osnos observes that the Trump presidency will probably continue its trajectory of unpredictability and volatility with interstate relations.

Trump, Taiwan, and a Break in a Long Tradition 
Jeffrey Bader 
Brookings, December 3, 2016

Bader warns the new administration of the serious risks in US-China relations if president Trump continues to take dangerous actions without understanding long-standing US national security concerns.” He refers China’s claim to Taiwan as the most sensitive issue in US-China relations and a “line not worth challenging.” By “casually” ending the long-standing protocol started by President Nixon, Trump may incentivize Beijing to seek harsher approaches to Taipei and Washington.

China in the Middle East: The Wary Dragon  
Andrew Scobell and Alireza Nader 
RAND Corporation, December 6, 2016

This report reviews China’s recent economic, political, and security engagements in the Middle East, particularly Saudi Arabia and Iran. The authors find that China is taking a “wary dragon” approach in the Middle East with little investment in diplomatic or military resources, despite its enormous energy, geostrategic, and political interests in the region. The report suggests that the US should allow China to play a more active role in maintaining the region’s stability while assuring American regional allies of its enduring security commitments.

Heading for Trade War with China 
Steve Hanke 
Cato Institute, December 6, 2016

Hanke criticizes Trump’s “nonsense” rhetoric on trade deficits, instead suggesting that a savings deficiency is the key factor in the decline of American manufacturing. He calls Trump’s stance on trade “misguided and dangerous” and linked it to the lessons learned from Japanese policy in the 1980s. He argues that, without addressing fundamental issues, Trump’s economic policies would increase the trade deficit, triggering a trade war between the US and China.

 

Events

Gaining Currency: The Rise of the Renminbi
Eswar S. Prasad

Brookings-Tsinghua Center for Public Policy, November 3, 2016

In this event, Prasad discussed some major points in his recent book of the same name. Prasad talked about the history of the RMB, key factors of China’s economic success, and the rise and international implications of its currency. Prasad argued that the RMB would not challenge the dominant status of US dollar any time soon because, unlike other reserve currencies, RMB has not met the prerequisites of being a safe-haven currency, which is favored by investors in the event of financial market turmoil. Prasad stressed the importance of institutional reforms, claiming the Chinese government needs to carefully handle domestic issues.

Stopping North Korea, Inc.: Sanctions Effectiveness and Unintended Consequences
John Park and Jim Walsh

Brookings, November 7, 2016

Park and Walsh discussed some findings from their study of North Korea’s response to sanctions, especially on how it sets up specific agencies to procure materials from overseas. From the interviews of North Korean defectors, Park found that despite tougher sanctions, North Korean officials pay Chinese middlemen higher commission fees in exchange of “outsourcing of logistics by the private Chinese company to other Chinese companies.” In order to make the sanctions work, Walsh suggested that the US should work with China in penalizing North Korea’s economic activities, while focusing on blocking North Korea’s channels for procurement.

 

Commentary

 

The Belt and Road Initiative and the US-China Relationship

Alek Chance

The central place of the Belt and Road Initiative (BRI, also known as “One Belt One Road or OBOR”) in China’s economic and foreign policy is clear. How it fits into U.S.-China relations is much less obvious. Does the initiative signify a new level of geopolitical competition, or does it present opportunities for the United States and China to improve their relationship? A survey of common attitudes in the U.S. reveals a deep ambivalence on this question and a general uncertainty about BRI’s broader significance. However, a few clear themes can be identified. By articulating them, perhaps a path forward can become more apparent.

First, American analysts and policymakers constantly raise the issue of standards in Chinese lending and development policy. This is grounded in pragmatic concerns like the environment, but also in worries that China provides a tempting but nonetheless unsustainable alternative to existing lending institutions. The most extreme form of this concern about standards derives from the apprehension that China seeks to create a parallel, illiberal economic or political order that competes with or replaces the so-called liberal international order. BRI raises the profile of this issue of standards at each of these levels.

Second, many American observers of BRI suspect that the initiative is a vehicle for narrow or short-term Chinese interests, or that it isn’t a genuinely far-sighted program for developing “win-win” cooperation. Such responses are often informed by the common Western view that China has a record of self-serving or counterproductive behavior in its economic relations with the developing world.

Finally, geopolitical aspects of the U.S.-China relationship significantly frame interpretations of BRI among many Americans. As China continues along its path toward becoming the world’s largest economy, it is at the same time perceived to be increasingly assertive, more accepting of risks, and more willing to alienate actors like the United States. BRI is naturally examined in light of these real or perceived trends.

Many of these concerns are legitimate and understandable, as they are grounded in a lack of clarity about China’s future direction and its impact on global economic regimes and norms. Indeed, both Chinese and American analysts envision BRI having major geopolitical implications. Regardless of how it is currently viewed by either Chinese or American strategic thinkers, BRI should be seen on both sides as a vital instrument for strengthening habits of cooperation between the two nations.

The current relationship between the United States and China is almost universally described as containing a mix of cooperation and rivalry. Areas of collaboration must provide a counterweight to areas of competition, so both nations have an interest in identifying issues and frameworks that transcend zero-sum geopolitics. In recent years, however, even once positive areas of the bilateral economic relationship have become sources of friction, challenging the assumption that economic interdependence alone can steady the relationship.

One bright spot in this increasingly complicated picture has been the expansion of U.S.-China cooperation to include addressing climate change. Chinese and American leadership in the COP-21 climate agenda has demonstrated the ability of the two nations to engage in positive-sum collaboration to promote a genuine and critical shared interest.

Like climate change cooperation, International sustainable development more broadly has the potential to be a transcending area that serves the interests of China, the United States, and the international community at large. BRI promises to provide global public goods in terms of increased connectivity that can result in improving life in developing countries and opening up economic opportunities for developed ones. The potential secondary benefits include greater international security and bolstered state capacity that follow from development.

Nonetheless, BRI’s positive potential often goes unrecognized in the United States. This is in part because it is viewed as an element of a broader strategic competition between the two countries, and in part because Chinese voices have done a poor job of explaining the initiative. Chinese and American policy communities can do more to establish clearer distinctions between areas of genuine competition and areas of shared interest to close perception gaps. This could reveal opportunities for important confidence building.

How should this be accomplished? In China, several points should be considered. First, officials and non-governmental advocates must understand that the “win-win” aspects of BRI and the initiative in general have been poorly communicated to American audiences. It can be very difficult to find comprehensive, authoritative sources of information on BRI in the English language. This can exacerbate perceptions that BRI is intended to exclude the United States.

More importantly, Chinese officials must work to promote high lending standards to demonstrate that BRI complements and advances the achievements of the existing international economic order instead of undermining it. Many Americans are apprehensive that China will challenge existing regimes and norms in ways that weaken developed states or create a race to the bottom in lending standards. Moreover, focusing BRI toward sustainable development and green energy will do much to convince foreigners of China’s commitment to a high-standards international order, increase global support for BRI, and reinforce China’s efforts to become a global leader.

Finally, Chinese state and non-state actors should take advantage of the American private sector’s considerable interest in BRI and improve outreach to this important group. American firms can serve important roles in BRI projects. Their involvement would reinvigorate the bilateral business relationship at a time when sources of friction are multiplying, yet many in the business community complain that information about potential opportunities is hard to come by.

For their part, Americans should view BRI realistically as an opportunity for selectively engaging with China. American interests won’t be served by all BRI projects, nor will American involvement be welcomed in all areas. Nonetheless, BRI must not be subsumed by a simplistic and categorical framing notion of competition between the two nations. U.S. policymakers should maintain open minds when assessing the impact of proposed BRI projects on American interest in places like Afghanistan or Central Asia more broadly. American and Chinese interests may overlap considerably in some regions or some issue areas, and this overlap should be exploited.

To help address a variety of policy differences and perception gaps, the U.S. and China should work together to establish a dedicated dialogue forum to discuss environmental, labor, and human rights standards in international development.

Such a dialogue could take place in bilaterally in the S&ED or within a multilateral forum like the G20. The two nations could further build trust through coordinating development priorities. U.S. officials could develop a set of projects as candidates for BRI funding, some of which could then be selected by Chinese officials according to their complementarity to China’s interests. This would direct the two nations towards identifying common interests and initiate habits of cooperation in development.

Over the longer term, the two nations should create synergy between their very different, but complementary, strengths in international development. China should recognize that the U.S. has a great depth of experience in developing the “soft” infrastructure necessary for full economic and human development, and for ensuring political stability. This includes governance reform and capacity, health, education and building civil society. Americans should embrace the shorter-term economic impact of infrastructure investment which, when properly paired with an attention to governance and human development issues, is indispensable to generating the domestic motors of long-term sustainable growth.

Finally, both nations should recognize that environmental cooperation has been the signature achievement of U.S.-China cooperation in recent years. Addressing climate change is a key area for cooperation because it represents genuinely shared, critical interests. By expanding these efforts to include creating an environmentally sustainable global economy for the 21st Century and beyond, the U.S. and China can continue this trend of transcending competition while providing global public goods. The Belt and Road Initiative can be an important instrument for carrying out this task.

Like any major initiative, the true impact—and indeed meaning—of BRI will be determined through the course of its implementation as diversity actors engage with it and as Chinese policymakers emphasize different aspects to meet with changing exigencies. While BRI has the potential to contribute to competition between the U.S. and China, it could also be used to enhance cooperation. If this potential is to be realized, the initiative must be engaged and shaped with conscious efforts to meet this end. Americans should thus be clear-eyed about the potential strategic impact of BRI, but also remain alive to the possibilities it presents and not be categorically dismissive or suspicious. Chinese should in turn be responsive to American concerns about BRI, which are shared by many in Europe, India, and beyond. Such concerns identify the scope of potential obstacles and delineate the most productive paths forward.

Alek Chance is a Research Fellow at ICAS. This commentary first appeared on China-US Focus.




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