SALAHUDDIN

When China emerged as a world economic and military power, it took many countries by surprise. While at one point it was considered a far-fetched perception that China will take the center stage in global politics and economics, it is no longer prudent to ignore Chinese influence. In a relatively short period, China has gone from being one of the poorest countries in the world to be one of the most politically active and economically rich countries. Many developing economies, including Pakistan, look up to China for guidance on economic policies. The Chinese market, being the biggest in the world, appeals to both local and international investors. China has quickly gained the reputation of being a ‘global power’ that can stand up to the likes of the United States and Japan.

With its ambitious Belt and Road Initiative, and the emergence of technology giants such as Tencent and Alibaba, China has both the will and the power to challenge the United States. As the current US President, Donald Trump, continues to attack international institutions and take a step back from global leadership, China is willing to emerge as a champion of globalization and expand its sphere of influence by investing in infrastructure around the world. It seems to be willing to fill the gap of a global leader, should the US retreat completely. Taking advantage of shifting global geopolitics and the Trump administration’s ‘America First’ policy, China has already established strong economic and military relations with countries in Southeast Asia. Its most iconic Belt and Road Initiative has attracted a lot of attention and has raised the alarm bells in many competitive economies. How the world should respond to this quickly growing Chinese influence remains an important question.

Today, China has an important role to play in international geopolitics and to maintain a balance of power globally. However, China’s current ambitions threaten to disturb that balance of power, especially as the US retreats from globalism towards a more conservative role. The previous US administration under Obama made efforts to improve US commitments in Southeast Asia through “rebalance to Asia” strategy that involved “multilateral diplomacy, economic integration, and military presence”. The Obama administration also pursued the Trans-Pacific Partnership (TPP) trade deal, the world’s largest free trade deal, to advance the US strategic interests in the Asia-Pacific region. The deal was immediately dismantled by the Trump administration. Many Asian countries now worry that the US does not have a clear strategic interest in Asia apart from containing China’s maritime presence in the South China Sea. In such a scenario, China has emerged as a champion, especially for the developing economies that are receiving billions of dollars in funds to build infrastructure. This new Chinese state-led funding is a source of economic prosperity for many countries that could not have raised funds to finance these projects otherwise. Therefore, many countries are eager to receive Chinese funding as the offer is on the table for anyone willing to participate in China’s “project of the century”.

The Chinese state-led funding is attractive to developing economies for a multiple reasons. Firstly, there is a major infrastructure gap globally that cannot be filled by the development banks and private investors alone. Lack of public funding has condemned many developing economies to poor and failing infrastructure. Developing economies have to compete aggressively to secure funding from multilateral institutions. Chinese investment presents an alternative to these sources of funding. The Chinese investment is ‘offered’ to developing economies as opposed to having them compete for it. Secondly, unlike the World Bank and other funding institutions, Chinese funding does not come with structural reform requirements and, therefore, it allows governments to make their own decisions about the allocation of funds. However, it does require countries to use a lot of Chinese labor and machinery and most contracts are awarded to state-owned Chinese firms. For developing economies, this is politically convenient as they are free from conditionalities that require fiscal reforms which are ever more unpopular among the masses.

Through its Belt and Road Initiative, China is essentially seeking to displace American hegemony in Asia. While most countries welcome this new Chinese investment, some countries such as India, are wary of accepting Chinese funding. They see the Belt and Road Initiative as a political tool and a debt trap that will essentially allow China to control foreign governments by attaining a strategic hold over them. Public sentiments about Chinese investment have slightly changed over the last few years as countries have started to accumulate debt. Pakistan, for example, is implementing one of the biggest projects within the Belt and Road Initiative. Valued at $62 billion, the China-Pakistan Economic Corridor or CPEC, was established in 2013 and many projects are currently under construction. The debts have accumulated so much that one of the main challenges faced by the new Pakistani government under Imran Khan, is whether to go to IMF for a bailout.

As China continues to grow and strive for global dominance, the world can no longer look the other way and ignore China’s global ambitions. Economically and militarily strong Asian countries such as Japan and India should work together to create a balance of power in Asia. Many countries have lost faith in the US leadership and are looking to either China or to each other for support. Asia is currently not high up in the list of Trump administration’s priorities. Therefore, strong Asian countries need to work together in a way as to maximize the benefits from Chinese investment and minimize the risks. To the extent that the Belt and Road Initiative is encouraging infrastructure building, it should be welcomed, as it could benefit the whole world. However, the dangers associated with the project, such as rising of debt to unsustainable levels, should be mitigated. While it is essential at the moment that US keep the status as the global leader, developing economies also need to take more responsibility. The US should help in driving the process, however, countries should own the initiative to counter China by building strategic alliances.