CHINA: An Imperial Power in the Image of the West?

BY WALDEN BELLO

CHINA: An Imperial Power in the Image of the West?

BY WALDEN BELLO CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Copyright 2019 by Focus on the Global South

Published by Focus on the Global South 4th Floor Wisit Prachuabmoh Building Chulalongkorn University, Phayathai Road Bangkok 10330, THAILAND Tel: +66 2 218 7363 Fax: +66 2 255 9976 Email: [email protected] www.focusweb.org CONTENTS

Executive Summary 7

I. Introduction: Will China Go the Way of the West? 9

II. Contrasting Experiences in Primitive Accumulation 12

III. Key Features of the Chinese Economy 20

IV. Vulnerabilities of the Economy 26

V. The Power Bloc 37

VI. China’s Global Reach: Following in the Footsteps of the West? 42

VII. The Belt and Road Initiative: Grand Plan for Domination or Strategy for Crisis? 54

VIII. The Strategic Dimension 67

IX. China and its Neighbors in the South China Sea 79

X. Conclusion: The Jury is Still Out 83

Endnotes 87

Acknowledgements 93

EXECUTIVE SUMMARY

This study seeks to answer the question: focused on the strategic dilemma of how Is China an imperial power in the image of to nullify the massive US forces right at its the West in its relationship with the global doorstep in the South China Sea. South? The answer it arrives at is that from the available evidence, the People’s Republic However, over the last 15 years, there have of China is not. So far, that is. The study’s been increasing accusations of Chinese central argument is that the emergence of state enterprises and private companies China as a capitalist power was marked by being involved in unfair labor practices, comparatively little violence and force in the environmentally damaging projects, process of primitive capital accumulation, land-grabbing, locking borrowing countries and neither has its global economic into debt, and indirectly providing support for expansion over the last 25 years. This is in dictatorships. Many of these accusations great contrast to the evolution of relations parallel similar criticisms of the behavior between the traditional western capitalist of state-owned enterprises (SOEs), private powers and the South. capitalists, and local authorities within China itself. China has also drawn criticism for its China is seeking what it considers its rightful unilateral moves in seizing disputed maritime place in the world, but this is not the same as formations and violating the territorial and striving for global hegemony. The Belt and economic rights of its neighbors in the South Road Initiative does not appear to be a grand China Sea. strategy for hegemony and is more likely an effort to solve China’s industrial overcapacity Many of these criticisms are valid, and crisis. Under different circumstances, unless China addresses them in a positive however, this may change. fashion soon, these questionable behaviors and practices could congeal into structures Currently, Beijing’s military posture is not of domination similar to those that have offensively oriented but is one of strategic marked the relationship of the West with the defense, with the government’s energies global South. Perhaps, equally worrisome is

7 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? that China’s expansion has its own complex healthy relationship between China and of worrisome characteristics that are not the global South. Civil society actors can reducible solely to reproducing western best help China by criticizing the Chinese patterns but can also lead, if unchecked, to government and corporate actors whenever hegemonic behavior. Foremost among these they reproduce the practices of western is a technocratic top-down approach to actors and offering strategies for good development with a cross-ideological appeal behavior that are not simply failed proposals that is resistant to democratic control and for “corporate social responsibility.” Also insensitive to environmental considerations important would be a debate and dialogue that is fully on display in Beijing’s Belt and with Chinese agencies and corporations Road Initiative (BRI). on their anachronistic 20th century technocratic approach to development that International civil society has an important threatens a massive ecological impact as role to play in bringing about a more Beijing pursues the BRI.

8 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? I INTRODUCTION: WILL CHINA GO THE WAY OF THE WEST?

The question that triggered this was: the West, it cannot be said that this has Has China turned into an imperial actor congealed into the structures of domination in the global stage in the manner of the that have marked the relations of the earlier United States, Great Britain, and other capitalist powers with the rest of the world. western powers? At least, not yet.

When we refer to these powers as The PRC’s rise as a global capitalist power “imperial,” we call attention to two over the last 40 years is distinctive in that fundamental processes that marked their it has not been marked by the massive rise as capitalist societies: one, capital violence and large-scale plunder that accumulation was accompanied and made accompanied the rise of the western powers possible by the violent dispossession over the last 500 years. Its military posture and exploitation of the lower classes by during this period has been one of strategic capitalist elites; and, two, their global defense, with its armed conflicts with other expansion and rise as hegemonic powers societies confined to border disputes, one was accomplished by violent state punitive expedition, and one large-scale action deployed against non-capitalist defensive campaign at the request of an societies. Through violence and force, adjoining country. western capitalist states created formal colonies and later what came to be known Currently, under the leadership of President as “neocolonies,” or formally independent Xi Jinping, the People’s Republic of China states that were subject to coercive is, perhaps more forcefully than in the past, control by the western powers via threats, seeking what it regards as its rightful place destabilization, and covert action. in the international system, but it is unlikely that it is engaged in a pursuit of global Our answer is that while the People’s hegemony. Also, the vaunted Belt and Road Republic of China (PRC) has in many Initiative is not so much a grand strategy cases exhibited behavior characteristic of as a desperate effort to externalize China’s

9 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? surplus industrial capacity that is weighing Over the last 40 years, in its rush to down the economy. Moreover, despite development, China has deployed a top- greatly increased defense spending, Beijing down technocratic approach resistant continues to adhere to a posture of strategic to democratic control and insensitive defense, with much of its energy devoted to to environmental considerations that is finding ways to overcome its dilemma in the reminiscent of the modernist mentality that South China Sea, where its forces are bottled guided the massive infrastructure building up by vastly superior US military might. in the Soviet Union during the Stalin era, the Hoover Dam in the US, the Narmada Dam in As China has “gone out to the world” India, the Three Gorges Dam in China itself, over the last 25 years, its banks, state and the World Bank-funded Nam Theun 2 enterprises, and citizens have been the in Laos. This anachronistic 20th century targets of complaints by many communities approach, which has drawn support from in host societies–criticisms that parallel governments and official agencies across accusations against the behavior of the the ideological spectrum, has been named same actors within China itself. To some “gigantism” by the Indian author Arundhati extent, these are mistakes and lapses that Roy and “neodevelopmentalism” and are inevitably experienced when one is on “extractivism” by others. A trademark of a steep learning curve. Concern about its China’s infrastructure-heavy development strategic dilemma in the face of US power assistance in many developing countries, in the South China Sea has also led China it is now being deployed over the vast to very questionable unilateral moves, like Eurasian land mass in the form of Beijing’s the seizure of disputed maritime formations, Belt and Road Initiative in an effort to that have alarmed its neighbors. alleviate Chinese industry’s massive problem of surplus capacity, with potentially As China becomes a more and more vast negative consequences. powerful player on the international scene, there is a danger that these negative China is not predetermined to become patterns of behavior may congeal or harden an imperial power, but it is at a critical into imperial or hegemonic structures. crossroads today. It may traverse the But in terms of its impact on the global path of the West or take a technocratic South, what should perhaps be of as much developmentalist road that can be just concern as its following the West’s imperial as destructive, or it may strike out on a path is China’s approach to development. different route in its relationship with the

AS CHINA BECOMES A MORE AND MORE POWERFUL PLAYER ON THE INTERNATIONAL SCENE, THERE IS A DANGER THAT THESE NEGATIVE PATTERNS OF BEHAVIOR MAY CONGEAL OR HARDEN INTO IMPERIAL OR HEGEMONIC STRUCTURES.

10 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? global South. International civil society can We embarked on this endeavor with no play an important role in this process by special expertise on China. Our methodology engaging China with constructive criticism is probably best described as being much of the behavior of its state agencies, state like that articulated by Karl Polanyi in the enterprises, and private corporations and the introduction to his classic work The Great technocratic and authoritarian predilections Transformation: of its leadership. Ours is not a historical work; what we We come to this conclusion after a are searching for is not a convincing comprehensive investigation that begins sequence of outstanding events, but an with an exploration of key aspects of the explanation of their trend in terms of historical development of capitalism in human institutions. We shall feel free to China; moves on to an examination of dwell on scenes of the past with the sole the key features and vulnerabilities of the object of throwing light on matters of the Chinese economy; discusses the expansion present; we shall make detailed analyses of China’s economic relations with the of critical periods and almost completely rest of the world, taking a close look, in disregard the connecting stretches of time; particular, at Beijing’s much vaunted Belt we shall encroach upon the field of several and Road Initiative; analyzes China’s disciplines in the pursuit of a single aim.1 strategic posture and its dilemmas; and draws out the implications of Beijing’s That single aim in our case was to answer behavior in one of its most controversial the question posed by Focus on the Global current problems: how to relate to its smaller South, the organization that commissioned neighbors as it manages its strategic this study: Is China an imperial power in the dilemma in the South China Sea. image of the West?

11 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? II CONTRASTING EXPERIENCES IN PRIMITIVE ACCUMULATION

An investigation into the development as it unfolded in China, the “Industrious of capitalism in China is critical to Revolution.” It was not a process that understanding the way that it currently could go on indefinitely without hitting the relates to the world. There is one dimension, spatial and institutional limits of the existing in particular, that is critical, and that is the market economies, resulting in a “high level centrality of force and violence in capitalist equilibrium trap” where productivity gains development in the West and their relatively could no longer be achieved in the “natural” much less salient role in China. fashion. China hit these limits. However, these limits were not purely economic in In his fascinating book Adam Smith in Beijing, character. The Chinese imperial regime’s the great historical sociologist Giovanni overriding concern with maintaining political Arrighi posed the question why, when both stability also acted as a barrier against rapid Europe and China had developed market and massive capital accumulation by any economies prior to the 18th century, there incipient capitalist class that could breach occurred a “Great Divergence,” whereby China the limits of the market. spiraled into decline while Europe went on to dominate the world. Europe, in contrast, broke through the economic and social barriers to capital accumulation, setting it on the dynamic “European path” of Violence and Capitalist capitalist development.2 Two factors were Transformation in Europe central here, which resulted in a process of accumulation that was distinctively capitalist Taking his cue from Adam Smith, Arrighi said and not simply mercantile in terms of its that in the two or three centuries before the dynamics. The first was class violence Industrial Revolution, market relations in both deployed internally by capitalist elites. China and Europe led to a division of labor The second was state violence directed that steadily resulted in productivity gains. externally, against non-European societies, Arrighi and others termed this development, by European capitalist states.

12 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Internal class violence and state violence The next high point was the Industrial were central to European capitalist Revolution and here the violent social development, and there were two high points transformation wrought by capitalism was in their deployment: the enclosure movement just as vicious. What he also called a social in England from the 1490’s to the 1640’s cataclysm was described thus by Polanyi: and the Industrial Revolution in the 18th and 19th centuries. Perhaps, the best description Before the process had advanced very of the violence of the enclosures, when far, the laboring people had been crowded peasants were driven from their lands so that together in new places of desolation, the these could be converted into grazing lands so-called industrial towns of England; the for sheep raising, was provided by Polanyi: country folk had been dehumanized into slum dwellers; the family was on the road Enclosures have appropriately been to perdition; and large parts of the country called a revolution of the rich against were rapidly disappearing under the slack the poor. The lords and nobles were and scrap heaps vomited forth from upsetting the social order, breaking down the “satanic mills.” Writers of all views ancient law and custom, sometimes by and parties, conservatives and liberals, means of violence, often by pressure and capitalists and socialists, invariably intimidation. They were literally robbing referred to social conditions under the the poor of their share in the common, Industrial Revolution as a veritable abyss tearing down the houses which, by the of human degradation.4 hitherto unbreakable force of custom, the poor had long regarded as theirs and Whereas the late feudal state tried to protect their heirs’. The fabric of society was the peasants, by the time of the industrial being disrupted; desolate villages and revolution, a thoroughly capitalist state had the ruins of human dwellings testified to become the agent of physical and social the fierceness with which the revolution violence against the lower classes and raged, endangering the defences of the engaged in the massive repression of the country, wasting its towns, decimating lower classes, this time of workers. its population, turning its overburdened soil into dust, harassing its people and Turning to the ability of European states turning them from decent husbandmen to subjugate other societies and thus into a mob of beggars and thieves. make capitalism a global force, a central Though this happened only in patches, explanation proposed by Arrighi is that the black spots threatened to melt into a the frequent inter-state wars in a Europe uniform catastrophe.3 where market relations were simultaneously spreading rapidly led to the development There were many peasant revolts, which of an arms industry that was the “primary resulted in thousands of peasants being source of the endless stream of innovations slaughtered by the forces of the nascent that continually created new spatial agricultural capitalist class, even as efforts configurations of trade and production of by the paternalistic state of the late feudal era increasing scale and scope and destroyed to moderate the exactions of this rising elite preexisting ones.”5 The spread of were largely unsuccessful. industrialization, in turn, made possible the

13 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? creation of military-industrial complexes that not only intensified competition among European states but also enabled them to achieve the overwhelming military superiority with which they battered down non-European polities and triggered the so-called “primitive accumulation of capital” through plunder.

Putting more flesh onto Arrighi’s insight, Ho-Fung Hung writes that whereas in imperial China, a truly entrepreneurial class could not emerge owing to spatial and institutional limits to the further development of market relations under one all-encompassing imperial polity, Europe’s “unusual interstate system…which was plagued by frequent military conflict, urged state makers to compete for internationally mobile capital to finance their war efforts, thus forging a state-capital alliance unseen anywhere else.” Under such an alliance, A cartoon (ca 1900) showing foreign powers conspiring to dismember China. Courtesy of Wikimedia “capitalists supported state expansion by Commons/National Archives purchasing government bonds and paying taxes, and the state offered military and powerful monarchies whose legitimacy political protection crucial to capitalists’ and efficacy relied above all on the accruing and securing of resource bases ability to make war. Bastioned artillery and trade routes.”6 fortresses reached impressive new dimensions that imposed new costs, This marriage of war-making and adding to the burden of sustaining profit-making was solidified by what has large armies and world-girdling navies. been termed a “revolution in military affairs” Some advocates argue that it was that took off between the 14th and the 16th the [revolution in military affairs] that centuries, roughly the same period that subsequently elevated Europe to global Europe’s global expansion began. Despite dominance, as unique broadside artillery some exaggeration on the role of advances platforms arrived off foreign shores in military technology, there is a great deal of in the form of ships of “fighting sail,” truth in the position of those military analysts and bastioned fortresses were built to who claim that “gunpowder technology protect coastal enclaves before armies changed not just the face of battle but also and political influence penetrated host societies, through intense centralization inland. Military domination is thus said of armed power and finance.”7 to explain European political and trade domination, after the defeat of local The military revolution…created war galley or junk navies and more traditional states, elevating and sustaining more armies even in territories that already

14 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? had guns, such as India and China. In “Chinese Walls;” it was literally the heavy sum, the [revolution in military affairs] is artillery of the western powers that made credited by some with having driven the primitive accumulation and expansion whole trajectory of modern world history, possible, and it was central to creating starting with the ascendance of small the social and political conditions that fiscal-military states ruled by European enabled the self-reinforcing reproduction of kings in the 15th-16th centuries, capitalism on a global scale. spreading European military power and then cultural and political influence globally after that.8 China’s Relatively Peaceful Primitive Accumulation After this first round of primitive capital accumulation, which was accompanied by Being one of the victims—though not the most coercion and violence that concentrated hapless—of Europe’s primitive accumulation, scattered economic resources into capitalists’ modern China’s emergence as a full-fledged hands domestically and globally,capital industrial capitalist economy was delayed accumulation was “self-sustaining.”9 and only came about with the country’s scrapping of its socialist experiment during In short, in Europe, state violence was the Mao period and its economic opening not simply a handmaiden of capitalist to the West in the late 1970’s to the 1990’s accumulation and expansion. To revise under the leadership of Deng Xiaoping. State Marx and Engels’ image in the Communist capacity that had been built up under Mao Manifesto, it was not only the “heavy artillery” was hitched to the project of rapid capitalist of cheap commodities that battered down industrialization under Deng.

Harvest time in rural China. Chinese farmers were the main beneficiaries of the first stage of economic reform in the late seventies and eighties, but urban dwellers were prioritized in the next phase of export-led industrialization. Courtesy of Steve Evans via Wikimedia Commons.

15 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? What made the process of primitive migrants from obtaining housing and social accumulation in China distinctive compared welfare benefits in the urban areas where to that in the West was that it did not involve factories were located. great state or class violence deployed internally, like the enclosure movement in This does not mean that there was no state England, and none at all externally in the violence or direct coercion at all. While form of aggression, plunder, or colonization. the absence of state violence was clear when it came to China’s global trade and China’s route to industrial capitalism investment push beginning in the 1990’s, involved a marriage of cheap labor and this was not the case domestically. There foreign investment in an era of globalization. was the relocation of thousands of peasant Labor was provided mainly by migrant labor families to clear the way for the Three from the countryside, of which the country Gorges Dam in the Yangtze River10 as well had an almost inexhaustible supply in the as legally sanctioned takeovers of peasant first two decades of rapid industrialization, properties by revenue-short local authorities which meant that it was largely market for urban development.11 Still, the overall forces that kept the price of labor down, not approach in the first decade of the reform state violence, though there was indirect was to encourage peasant prosperity as coercion in the form of controls like the the engine of growth,12 while today the ban on independent unions and the hukou rural areas benefit from reforms such as residential system that prevented rural free compulsory education for the first nine

Roadside billboard honors Deng Xiaoping, father of China’s economic liberalization, at the entrance of the Lychee Park in Shenzhen. Courtesy of Brücke-Osteuropa via Wikimedia Commons.

16 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? years, provision of basic health insurance, that of its neighbors is traced to political and a minimum income guarantee.13 There reasons by one analyst, that is, as “affiliates was none of the massive violence employed of the US military alliance structure, Japan, across the board against peasants and South Korea, and Taiwan were tacitly allowed workers during Europe’s period of capitalist to run mercantilist economies, shutting out transformation. foreign economies from their markets even as their own companies enjoyed easy access There was, of course, the Tiananmen Square to the US market.” China, in contrast, “was massacre of 1989, but while the dynamics never going to get that deal; as the price of of capital accumulation did contribute admission to the US-dominated world trading to popular discontent, it was largely the system, China would need to give foreign demand for greater political democracy that companies substantial market access.”17 triggered the protests that met a violent, inexcusable state response. Europe and the United States used force to open and retain markets for resources and Turning to foreign investment, while markets for goods in their period of ascent. investment directed at production for local China, on the other hand, did not have to do consumption accounted for the bulk of total this. Japan, South Korea, Taiwan, and the investment, investment from abroad for so-called Southeast Asian “tiger cubs” had export was a decisive element in China’s already pioneered the strategy of export- capital accumulation. Foreign direct oriented industrialization via the penetration investment (FDI) played a much larger role in of the relatively low-tariff economy of the the capitalist industrialization of China not United States from the late 1950’s to the only with respect to Europe and the United early 1990’s. And owing to the low prices of States but also to its East Asian neighbors. its products because of cheap labor, China From 1985 to 2005, annual foreign direct was able to outcompete these rival Asian investment in China is reported to have economies in labor intensive production. averaged nearly three per cent of GDP, a fairly large figure, whereas during their high-growth But Beijing was not just replicating the eras, Taiwan and Korea had FDI inflows of export-led path. It was, as Hung points only about 0.5 per cent of GDP and Japan out, following the strategy of Japan and less than 0.1 per cent of GDP.14 Whereas the East and Southeast Asian economies almost all exports from Korea, Taiwan, and of peacefully accessing the US market that Japan were accounted for by domestic firms, was made possible by the broader political in the case of China, since the early 1990’s, alliance with the hegemon. China was foreign firms have accounted for a third or a communist state but it entered into an more of exports.15 When it comes to high- informal political alliance with the US against tech products, the situation is even more the Soviet Union in the 1970s. The rationale lopsided, with foreign firms accounting for of this alliance ended with the collapse of the around three quarters of exports.16 Soviet Union, but inertia, and the commercial and financial benefits that this alliance The centrality of foreign investment in offered to both the Chinese and US elites China’s primitive and immediate post- kept it going well into the first decade of the primitive capital accumulation relative to 21st century.18

17 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? When China joined the World Trade labor markets is remarkably slow, with wages Organization in 2001, China enjoyed the fruits and labor-force participation rates remaining of the global liberalization of trade promoted depressed and unemployment rates by the agency. In so far as coercion, formal remaining elevated for at least a full decade or informal, was used to liberalize global after the China trade shock commences. trade via the WTO, it was the United States Exposed workers experience greater job and the European Union that deployed it,19 churning and reduced lifetime income. At while China simply sat back, as it were, to the national level, employment has fallen enjoy the benefits. in U.S. industries more exposed to import competition, as expected, but offsetting Another unique condition enjoyed by employment gains in other industries have China was that its industrialization came yet to materialize.”20 at a time when neoliberal policies in the United States and Europe resulted in the The “China Shock” is estimated to have led to tearing up of the Keynesian social contract the loss of 2.4 million American jobs.21 This, between capital and labor and allowed in turn, has been one of the triggers of the transnational corporations to roam the “Trump Shock”—President Donald Trump’s world in search of low-priced labor, and declaration of economic war on Beijing. here the so-called “China price” was simply unbeatable. Conclusion China was, in fact, the biggest beneficiary of globalization. This came, however, at a Force and violence employed by the state price for other economies. Not only did its was a central feature of the expansion of cheap goods outcompete those of other market relations that enabled the transition to developing countries like Mexico and Brazil industrial capitalism in Europe. In contrast, in their own markets, but its receptivity to the further development of market relations in foreign investment and cheap labor proved China, the world’s most prosperous society, to be a winning combination that proved up till the end of the 18th century, hit a “high to be destabilizing to the main promoter of level equilibrium trap” that prevented its corporate-driven globalization and trade “industrious revolution” from making the liberalization, the United States. Contrary transition, an outcome to which the imperial to neoliberal claims, a landmark study regime’s overriding concern with social concluded that in the US, “adjustment in local stability also contributed.

WHEN CHINA JOINED THE WORLD TRADE ORGANIZATION IN 2001, CHINA ENJOYED THE FRUITS OF THE GLOBAL LIBERALIZATION OF TRADE PROMOTED BY THE AGENCY.

18 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? What was mainly responsible for this “Great China did not have to fight to open Divergence” was the unique interstate system foreign markets since its period of rapid in Europe that was plagued by constant industrialization coincided with the process military conflict. This led to the development of corporate-driven globalization and global of arms industries whose innovations trade liberalization promoted by the United impacted on the broader process of capitalist State and spearheaded by the World Trade industrialization. The social and political Organization. While there was a great correlate of this technological synergy was a deal of intimidation to open up developing state-capital alliance. State violence employed country markets, it was mainly the United in the service of the emergent capitalist States and the European Union that engaged class to dispossess the peasantry at home in this while China simply sat back to enjoy and plunder non-capitalist societies abroad the benefits of market openings in both the was key to the primitive accumulation that global North and the global South. China preceded, then enabled the self-sustaining was also the beneficiary of the neoliberal accumulation of capital in the West. tearing up of the social contract between capital and labor, which set transnational China was spared this major deployment of corporations free to roam the world in state force and violence owing to its status search of cheap labor. as a late capitalist industrializer after its opening to the West in beginning in the China has been the biggest beneficiary of late 1970’s. Though there were instances globalization. Its economic rise has, however, of state violence, forced relocations, and proven detrimental to manufacturing industries forced land acquisitions, the Chinese route both in many industrially advanced developing to capitalist transformation, compared to countries as well as in the United States, Europe’s primitive accumulation, was a which had expected its interests to be served relatively peaceful process that saw the by globalization and trade liberalization. marriage of cheap labor from the countryside Chinese leaders in the last three decades have and capital from abroad that took place in the described China’s trajectory as a “peaceful urban industrial complexes of Southeastern ascent” within the global system. What is China, the aim of which was to produce ironic is that this peaceful ascent has proven to cheap manufactured commodities for global be so destabilizing to countries that had long markets. The entry of foreign capital was the preceded it in the capitalist transformation of quid pro quo for market openings in the West. their economies.

19 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? III KEY FEATURES OF THE CHINESE ECONOMY

Similar to an understanding of the conditions to claim that its model was transferable surrounding the development of capitalism or endorse what came to be known as the in China, an acquaintance with the key “Beijing Consensus” that some foreign characteristics and vulnerabilities of China’s economists claimed was the Chinese contemporary economy will enable us to response to the neoliberal “Washington get a sense of the dynamics and direction Consensus.” It is only recently, as its of China’s economic relationships with the geoeconomic competition with the United global South. For instance, it is easy to States has intensified, that one encounters mistake the Belt and Road Initiative (BRI) as this claim by Chinese officials. a grand plan for China’s global hegemony, as many have, if one does not take into China’s contemporary political economy has consideration China’s massive overcapacity four key features: 1) It is largely liberalized or problem, for which the BRI has been devised market driven; 2) it is largely privatized but as a solution. And one cannot understand with state intervention in areas considered the overcapacity problem without referring, in strategic; 3) its cutting edge is export-oriented turn, to one of the central features of China’s production sustained by “financial repression”; economy, which is the decentralization of and 4) it is decentralized, with a great deal of economic decision-making, which has led to autonomy for local decision-making while a great number of competing projects, much central authorities focus on broad national- waste, and tremendous surplus capacity. level macroeconomic strategies and policies.

China’s economy is a capitalist economy, though one that is uniquely Chinese. It Liberalization might be called “capitalism with Chinese characteristics,” to give a different spin Liberalization, or the removal of state controls to Deng’s description of his project as on production, distribution, and consumption, “socialism with Chinese characteristics.” took place in three stages over the 1980’s The Chinese leadership at first hesitated and 1990’s. A succinct description of this

20 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? process is provided by Hung: “The market Rosalyn Hsueh characterizes the Chinese reform started with decollectivization and state as having pursued a “liberalization restoration of a peasant economy in the two-step”: countryside in the early 1980’s, followed by urban state-enterprise reform and price It has shifted from universal controls reform in the late 1980s. In the 1990s, SOE on FDI [foreign direct investment] at the [state-owned enterprise] reform accelerated, aggregate level across all industries and the transformation of these enterprises to selective controls at the sectoral into profit-oriented capitalist corporations level. It employs a bifurcated strategy emerged as the core agenda of reform.” to meet its twin goals of complying with Throughout these phases, the main WTO commitments and retaining some thrust of the reform was “to decentralize control. In strategic sectors—those the authority of economic planning and important to national security and the regulation and to open up the economy, promotion of economic and technological first to Chinese diasporic capital in Asia development—the government centralizes and then to transnational capital from all control of industry and strictly manages over the world.”22 the level and direction of FDI. In less strategic sectors, the Chinese government relinquishes control over industry, Privatization cum Strategic decentralizes decision-making to local State Intervention authorities, and encourages private investment and FDI.23 While market signals stemming from local consumer demand and global demand In other words, China permits large-scale became the dominant determinant of foreign direct investment “to structure resource allocation, the visible hand of the foreign competition in ways that allow it state did not disappear. While departing to transfer foreign technology, increase from central planning, the Chinese the national technology base, encourage state did not follow the Northeast Asian indigenous technology and production developmental state model that restricted capacity, and promote domestic business. foreign investment and favored domestic By exercising this bifurcated strategy, enterprises across the board. China manages to retain political control and regulatory capacity and to modernize, In contrast to the developmental state, industrialize, and transform its economic non-strategic sectors of the economy were system in the context of international opened up to competition among private integration.”24 enterprises, while those areas considered strategic from the point of view of national Given the massive pullback of the state security, national interest, and overall from large swathes of the economy, there is “national competitiveness” were subject justification in describing China’s political to significant state regulation, with much economy as “neoliberal with Chinese production controlled by state-owned characteristics,” as David Harvey does.25 enterprises (SOEs) that were in competition But perhaps, it is better characterized as a with one another. In her pioneering work, market economy with strategic islands of

21 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? A small vegetable farm in rural Hainan Province. Agriculture was once the backbone of China’s economy. Now it makes up only 9 per cent of GDP but accounts for more than 1/3 of the work force—about 300 million people—engaged in agricultural pursuits. Courtesy of Anna Frodesiak via Wikimedia Commons.

state-controlled production and with broad Exports at their peak in the first decade of macroeconomic surveillance exercised by this century came to a whopping 35 per the central state. cent of GDP, a figure that was triple that of Japan.26 China became the “hub for a global production network that begins with design Export Oriented Production studios in the United States and Europe; cum Financial Repression proceeds through producers of specialized and a Managed Currency components and raw materials in East and Southeast Asia; and ends up in China, where While the greater part of domestic designs, materials, and components are production was directed at the local brought together in finished products that market, the strategic thrust of the Chinese are then sent all around the world.”27 economy post-liberalization was rapid industrialization via production for export, The focus on export oriented production a feature captured in the saying that China meant restraining the growth of domestic became “the manufacturer of the world.” consumption, a feature that was underlined

22 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? by the policy of financial repression, that is, wage labor was a formula that unleashed a the interest rate on savings from consumers flood of cheap Chinese goods on the world was deliberately kept low in order to keep that proved to be deeply destabilizing not the interest rate of loans to state-owned only for the industrial sectors of economies enterprises and private enterprises engaged in the global North but also in the global in production for export low. From 2004 to South like Mexico and Brazil. 2013, the average real deposit rate was 0.3 per cent.28 Decentralized Authoritarianism A third key ingredient of export-oriented manufacturing was a policy of keeping the Contrary to the popular image of China’s value of the renminbi low relative to the development being the product of dollar. From 1979 to 1994, the renminbi centralized direction, a decentralized steadily depreciated against the dollar, from character has, in fact, been one of its key 1.5 to 8.7, as China moved away from its old features. Decentralization has been one Mao era import substitution model towards of the key ingredients of China’s growth an export-oriented model that required formula, dating to the 1990’s. Beijing an undervalued renminbi to make China’s “started evaluating local officials by how exports competitive on global markets. quickly the economy grew under their Then in 1994, the renminbi was devalued watch,” and they, in turn, “competed with 33 per cent relative to the dollar, followed each other to woo firms, offering them by a peg of 8.3 renminbi to the dollar over cheap land, tax breaks, and low cost the next nine years, greatly boosting the labor.”30 Described as essentially like competitiveness of Chinese goods in turning the bureaucracy into a “large start global markets. up business,”31 decentralization sought to decisively break the command economy But the fourth ingredient in the export-led as well as force local authorities to “own” model, its “indispensable fuel’” according the reform process both by giving them to Hung, was the “protracted low-wage the responsibility for coming up with the labor released from the countryside resources for investment and allowing since the mid-1990’s.” While there was a them reap the rewards of successful capital “demographic windfall” in the form of large accumulation. rural surplus labor force that allowed China to take advantage of low-wage labor longer Provincial and local authorities have thus than other Asian economies, the latter was had a great deal of power in interpreting and also a result of government policies that implementing general strategic directives “intentionally or unintentionally bankrupted from Beijing. The economic authority of the the countryside and generated a continuous central government has been deliberately exodus of the rural population in the weakened, its role being transformed into 1990’s.”29 that of an “indirect player“ focused on devising the macroeconomic backdrop Be that as it may, the combination of such as interest rates, exchange rates, favorable financial policies for the export and preferential policy toward certain sector, an undervalued currency, and low regions and sectors.32 Indeed, China has

23 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? been described as the “most decentralized China, however, has an advantage over other country on earth, with local governments’ countries that makes the system work and share of revenue more than twice that not fly apart, and that is the Communist common in developed countries and even Party structure that parallels the government much bigger than that typical of developing structure at all levels and across all regions. countries.”33 While allowing factional conflicts to a significant degree, the party structure and It is important to note, however, that strong its attendant discipline are what makes local authority and command of resources in possible the paradox of “decentralized the capital accumulation and development authoritarianism,” a term coined by Hung. process covered mainly the nonstrategic sectors of the economy. Important agents of central control across provinces were Conclusion some key state owned enterprises (SOEs) in the designated strategic sectors, such Market forces dominate China’s economy, as energy, heavy industries, railways, and with the state retreating to a stance telecommunications that were directly of broadly regulating the economy but controlled by Beijing though they themselves directly intervening or directly engaging enjoyed a great deal of autonomy. Here it in production in industries considered must be qualified though that the majority to be “strategic.” Private enterprises, of the country’s 150,000 SOEs and two local or foreign, are given free rein in thirds of all SOE assets were controlled by most sectors and industries, but state- provincial and local governments.34 owned enterprises dominate the strategic sectors. SOEs are expected to make a The relationship between the local profit, though in practice, many operate and the center has oscillated between with a “soft budget constraint.” Export- decentralization and recentralization oriented industrialization has been the over the years, with the latest phase of central dynamic of the economy, a thrust recentralization, albeit limited, taking place that has been promoted by restraints on under the current leadership of Xi Jinping. the growth of domestic consumption, In most other countries, the extent of financial repression, keeping the value decentralization would probably have led of the renmimbi low relative to the dollar, to a permanent weakening of the center. and, of course, low wages. Finally,

CHINA HAS BEEN DESCRIBED AS THE “MOST DECENTRALIZED COUNTRY ON EARTH, WITH LOCAL GOVERNMENTS’ SHARE OF REVENUE MORE THAN TWICE THAT COMMON IN DEVELOPED COUNTRIES AND EVEN MUCH BIGGER THAN THAT TYPICAL OF DEVELOPING COUNTRIES.”

24 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? economic decision-making in China is of these sometimes operate as virtual marked by a great deal of autonomy for fiefdoms. But the key factor ensuring that provincial and local authorities, with central the economy does not degenerate into authorities focusing on formulating and anarchy is the nationwide structure of the broadly supervising the implementation Communist Party which parallels the state of nationwide fiscal, monetary, tax, foreign structure at all levels, cuts across regions, investment, and foreign economic policies. and exercises a discipline unmatched Nevertheless, through some 160 SOEs, by state agencies. “Decentralized central authorities have some control on authoritarianism,” is probably the most apt the strategic industries, though a number description of this system.

Workers and supervisor at an electronics factory in Shenzhen. Labor-intensive assembly of components for electronic exports was the cutting edge of China’s export success. With labor costs rising, electronics assembly and garments firms are moving to areas with cheaper labor, like Vietnam. Courtesy of Steve Jurvetson via Wikimedia Commons.

25 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? IV VULNERABILITIES OF THE ECONOMY

There are a number of contradictions, pace. With the onset of the global financial fissures, or weak points in the economy. crisis, however, the government put together These are regional inequalities, overcapacity a massive $585 billion stimulus package, a or overproduction, financial vulnerabilities, significant part of which was earmarked to and social inequalities. infrastructure and other development projects in western and northeastern China, though the actual impact of this in reducing regional Regional Disparities disparities was limited.

Regional inequalities in China derive from the decision of the Communist Party leadership to Overcapacity devote attention and resources to certain parts of China in the first decades of the opening of China is currently burdened with an the economy to global trade. It was natural overcapacity problem, especially in heavy that these would be the coastal regions, industry and many medium industries. especially southeastern China, where the first There has been significant overcapacity in experiments in setting up Special Economic the steel, iron, aluminum, and automobile Zones (SEZs) to attract foreign investors were industries, leading to practically flat prices made. According to the Asian Development and causing some analysts to saythat China Bank, “during the 1980’s, regional disparity is now suffering from “industrial deflation.”36 was declining, but with export-led Since China accounts for a great part of industrialization getting into high gear in the global production and trade in heavy goods, 1990’s there was a significant widening of the its surpluses in these goods have brought gap among the four regions. This was mainly down global prices, contributing to global due to the extraordinarily high economic deflationary pressures. growth rate of the eastern region compared to the other regions.”35 In the 2000’s, regional Overcapacity is a symptom of overproduction disparities continued to grow, but at a slower and overaccumulation, and it is a product of

26 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? the Chinese way of capitalism. Specifically, it Since 2014, China has produced more is due to repression of domestic consumption than half of all the steel in the world. and excessive investment. Repression However, of the 1.1 billion tons of steel of consumption was a policy dictated by Chinese factories were capable of the need to channel people’s savings to making in 2015, only 70 per cent was the industrial export sector. Excessive actually produced. That year, more than investment stemmed from the decentralized half of China’s steel companies posted economic strategy where local areas were a loss, and prices were driven so low given a great deal of autonomy in investment that steel was cheaper than cabbage, decisions. Many local authorities, says as was the popular observation at the Hung, perhaps the leading expert in China’s time. That sort of excess has played out overproduction, act “developmentally,” that again and again across Chinese industry. is, they pick industrial “winners” and act Consider that China produces thirteen proactively to set these up at the local level. times as much aluminum as the United The totality of these efforts, however, “creates States, and about half of the global anarchic competition among localities, supply. At its peak, China was producing resulting in uncoordinated construction more than 40 per cent of the world’s of redundant production capacity and ships. According to state media, infrastructure. Foreign investors, with the twenty-one industries suffer from expectation that the domestic and world “serious” overcapacity, a list that includes market for Chinese products will grow cement, aluminum, shipbuilding, steel, incessantly, also race with one another to power generation, solar panels, wind expand their industrial capacity in China.”37 turbines, construction machinery, chemicals, textiles, paper, glass, shipping, Overcapacity is not a recent problem that oil refining, and…heavy engineering.39 has just surfaced recently. As early as the 2000’s, in fact, more than 75 per cent of the To solve the overcapacity problem, China country’s industries were suffering from has tried to shut down the less efficient overcapacity and fixed asset investment enterprises and “rationalize” the remainder. in industries already experiencing This is, however, easier said than done, overinvestment accounted for 40 to 50 per because officials are scared to death of cent of China’s GDP growth.38 The situation, provoking worker unrest since the ability however, has worsened since then, as one to maintain social stability is one of the analyst points out: key justifications used by the Communist

SINCE CHINA ACCOUNTS FOR A GREAT PART OF GLOBAL PRODUCTION AND TRADE IN HEAVY GOODS, ITS SURPLUSES IN THESE GOODS HAVE BROUGHT DOWN GLOBAL PRICES, CONTRIBUTING TO GLOBAL DEFLATIONARY PRESSURES.

27 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Party for its continued political dominance. The real advantage of China’s system of Moreover, shutting down enterprises may state ownership isn’t that the cleanup be demanded from the center but it is the is easier than in market economies; it’s local authorities that have to deal with the that the clean-up is easier to put off, consequences, and so the natural response something that it can do indefinitely but of the latter is to resist. Over time, alliances not forever. State firms may be “backed” of local officials and enterprise managers by the state, but in practice that doesn’t have evolved strategies of keeping “zombies” mean that the government covers the alive, the key elements of which are companies’ debts if they can’t repay subsidizing them, incessantly borrowing from them. Rather it means that the banks state banks to keep them going while staving are safe from political fallout if the loans off demands for repayment, and “internal go bad. They will just hold bad loans on protectionism,” or keeping out competing their books and, with the government’s products from other localities.40 acquiescence, pretend that they’re fine— as they’ve been doing for some years The end result is that keeping “zombies,” already. In the short term, there’s no real which are mainly SOEs , alive has been fallout. Sure bank profits erode—after all, extremely costly. Overcapacity brings down a big chunk of their loans aren’t paying prices, bringing down profits throughout interest—but otherwise no one has to an industry. Indebtedness becomes a take responsibility for mounting bad permanent condition, so that one can speak loans. And, most importantly, deadbeat of a permanent line of credit to banks which companies are kept alive.42 is never repaid. Calculations of the levels of debt of the public and private corporate But the financial system has other sector in China are not easy to come by, but vulnerabilities apart from the mountain according to the consulting firm McKinsey, of debt owed by SOEs. These are a real China’s companies went from owing $3.4 estate bubble, a roller-coaster stock trillion to $12.5 trillion between 2007 and market, and an uncontrolled shadow mid-2014, “a faster buildup of debt than in banking system. any other country in modern times.”41 The Real Estate Bubble. There is no doubt that China is already in the midst of a real Financial Vulnerabilities estate bubble. As in the United States during the subprime-mortgage bubble Massive indebtedness, mainly to Chinese state that culminated in the global financial banks, clearly poses a threat to the economy. crisis of 2007-09, the real estate market But China is no ordinary capitalist economy. has attracted too many wealthy and Under normal capitalism, when loans are middle-class speculators, leading to a frenzy nonperforming, the banks come calling on the that has seen real estate prices climb sharply. debtor and either collect or force them into bankruptcy. But in China, the fact that the Chinese real estate prices soared in state enterprises and the banks are owned by so-called Tier 1 cities like Beijing and the government places the day of reckoning Shanghai from 2015 to 2017, pushing far into the future. As Dinny McMahon writes: worried authorities there to take measures

28 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? to pop the bubble. Major cities, including The Shanghai Casino. Financial repression— Beijing, imposed various measures: keeping the interest rates on deposits low to They increased down-payment subsidize China’s powerful alliance of export requirements, tightened mortgage industries and governments in the coastal restrictions, banned the resale of property provinces—has been central in pushing for several years, and limited the number of investors into real estate speculation. homes that people could buy.43 However, growing uncertainties in that sector have caused many middle-class investors However, Chinese authorities face a to seek higher returns in the country’s poorly dilemma. On the one hand, workers regulated stock market. The unfortunate complain that the bubble has placed owning result: a good many Chinese have lost their and renting apartments beyond their reach, fortunes as stock prices fluctuate wildly. thus fueling social instability. On the other As early as 2001, Wu Jinglian, widely hand, a sharp drop in real estate prices regarded as one of the country’s leading could bring down the rest of the Chinese reform economists, characterized the economy and—given China’s increasingly corruption-ridden Shanghai and Shenzhen central role as a source of international stock exchanges as “worse than a casino” in demand—the rest of the global economy which investors would inevitably lose money along with it. China’s real estate sector over the long run.46 accounts for an estimated 15 percent of GDP and 20 percent of the national demand At the peak of the Shanghai market in June for loans. Thus, according to Chinese 2015, a Bloomberg analyst wrote that “No banking experts Andrew Sheng and Ng Chow other stock market has grown as much in Soon, any slowdown would “adversely affect dollar terms over a 12-month period,” noting construction-related industries along the that the previous year’s gain was greater entire supply chain, including steel, cement, “than the $5 trillion size of Japan’s entire and other building materials.”44 stock market.”47

The problem is not just a real estate When the Shanghai index plunged 40 percent market slowdown having a domino effect on later that summer, Chinese investors were the rest of the economy owing to reduced hit with huge losses—debt they still grapple demand; it is also that so many other with today. Many lost all their savings—a industrial sectors are heavily invested in significant personal tragedy (and a looming real estate. As the former chief economist national crisis) in a country with such a of the Agricultural Bank of China writes, poorly developed social-security system. “Almost all big manufacturing companies have, to a certain extent, gotten involved in Chinese stock markets, now the world’s real estate…For many companies sales are second largest, according to some accounts, stagnant, business is difficult, and the ability stabilized in 2017, and seemed to have to earn a profit has sharply declined, so recovered the trust of investors when they more and more manufacturing companies were struck by contagion from the global have started to subsidize their losses sell-off of stocks in February 2018, posting by getting involved in real estate or with one of their biggest losses since the 2015 financial investments.”45 collapse.

29 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Shadow Banking Comes Out of the their capital by borrowing from the formal Shadows. Another source of financial banking sector. These loans are either instability is the virtual monopoly on credit registered on the books or “hidden” access held by export-oriented industries, in special off-balance-sheet vehicles. state-owned enterprises, and the local Should a shadow banking crisis ensue, governments of favored coastal regions. it is estimated that up to half of the With a significant part of the demand for nonperforming loans of the shadow banking credit from a multitude of private companies sector could be “transferred” to the formal unmet by the official banking sector, banking sector, thus undermining it as well. the void has been rapidly filled by so-called In addition, the shadow banking sector is shadow banks.48 heavily invested in real estate trusts. Thus, a sharp drop in property valuations The shadow banking sector is perhaps would immediately have a negative impact best defined as a network of financial on the shadow banking sector—creditors intermediaries whose activities and would be left running after bankrupt products are outside the formal, developers or holding massively depreciated government-regulated banking system. real estate as collateral. Many of the shadow banking system’s transactions are not reflected on the regular Is China, in fact, still distant from a Lehman balance sheets of the country’s financial Brothers–style crisis? Interestingly, Sheng institutions. But when a liquidity crisis and Ng point out that while “China’s shadow takes place, the fiction of an independent banking problem is still manageable…time is investment vehicle is ripped apart by of the essence and a comprehensive policy creditors who factor these off-balance- package is urgently needed to preempt sheet transactions into their financial any escalation of shadow banking NPLs assessments of the mother institution. [nonperforming loans], which could have contagion effects.”50 Beijing is now cracking The shadow banking system in China is not down on the shadow banks, but these are yet as sophisticated as its counterparts on elusive, and unless there is a fundamental Wall Street and in London, but it is getting reform in its national credit system to end there. Ballpark estimates of the trades the virtual monopoly by the export-oriented carried out in China’s shadow banking economic complex of the banking system, sector range from $10 trillion to more than there will always be a strong demand for $18 trillion. these sub rosa entities.

In 2013, according to one of the more Finance is the Achilles’ heel of the Chinese authoritative studies, the scale of shadow economy. The negative synergy between banking risk assets—i.e. assets marked by an overheating real estate sector, a volatile great volatility, like stocks and real estate— stock market, and an uncontrolled shadow came to 53 percent of China’s GDP.49 banking system could well be the cause of That might appear small when compared the next big crisis to hit the global economy, with the global average of about 120 percent rivaling the severity of the Asian financial of GDP, but the reality is that many of these crisis of 1997-98 and the global financial shadow banking creditors have raised implosion of 2008-09.51

30 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? A factory along the Yangtze River belches smoke. Severe air pollution now plagues urban areas all over China. Courtesy of Wikimedia Commons.

Environmental Crises China the world’s biggest car market, with the consequent rise in unhealthy levels of Not surprisingly, China’s infrastructure- airborne pollution in the cities. Owing to intensive smoke-stack-industries- its price competitiveness, coal continues to dependent high speed growth has be the fuel of choice for generating power, been accompanied by widespread and accounting for 65 per cent of electricity chronic environmental crises, with use. As Elizabeth Economy points out, perhaps the dangerous air pollution “[A]s China’s urban middle class expands, levels in Beijing being the most widely and income levels continue to rise, more discussed internationally. Water scarcity, energy is consumed: on average urban desertification, deforestation, soil erosion residents use as much as four times more and degradation, and soil and water energy than their rural counterparts.”52 contamination have all contributed to a greater concern about the environment, Apart from their massive negative impact especially among the middle class. Yet that on the environment and public health, same middle class is the source of much fossil fuel-driven industrial processes of the problem. Reliance on fossil fuels have increasingly boomeranged on the contributes significantly to air pollution economy. Economists have estimated that and climate change. Prosperity has made environmental degradation and pollution

31 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? cost the Chinese economy the equivalent Estimates of China’s Gini Index or Gini of 3 to 10 per cent of GDP owing to work Coefficient, the most commonly used days missed, crops lost to pollution and measure of inequality, range from 0.47, contamination, decline in tourism, and the government’s estimate, to 0.55.57 As other problems. A recently published Arthur Kroeber notes, “If we accept the retrospective analysis by the Chinese government’s figure, China’s income Academy of Sciences placed the figure inequality is substantially greater than all higher, at 13.5 per cent of GDP in 2005.53 developed countries. More important, it is much greater than in the successful East A concrete illustration of pollution’s negative Asian economies it emulates (Japan, South impact on the economy comes from Korea, and Taiwan) or even India—a country agriculture. In many instances, farmers long infamous for its extremes of wealth and know that their vegetables are contaminated poverty.”58 with heavy metals like cadmium or mercury and don’t eat local produce. Yet they keep Though the countryside was favored in the the knowledge to themselves since public first decade of reform, the urban classes have awareness of the fact could lead to a drop been the main beneficiaries of the country’s in sales and a crisis in the local economy, export-oriented manufacturing strategy over as happened with the discovery of cadmium the last 30 years. Nonetheless, the ratio of levels exceeding government safety levels in the average urban income to the average rice from Hunan province, which led to sales rural income has fallen from 3.3 times in of rice plummeting. China is said to produce 2007 to less than 3.3 times at present.59 This 12 million tons of heavy metal-contaminated seemingly positive trend does not, however, grain every year, costing the economy more reflect the fact that “land expropriations have than $3.2 billion.54 been the single greatest source of unrest in China,”60 owing to local authorities legally taking over farmers’ lands to fund their Social Inequalities development projects.

China’s breakneck capitalist growth Class-related inequality has recently been relying on cheap labor has had two joined by gender-related inequality as a contradictory effects on the socioeconomic great source of concern. Ironically, as China conditions of its people. On the one hand, has become more prosperous, the gap has people living in extreme poverty declined increased between women’s incomes and from 88 per cent in 1988 to two per cent economic status and those of men. at present.55 On the other hand, it has With the headlong rush towards capitalism, converted it from one of the world’s most the earnings of women went down from egalitarian societies during the Mao period 80 per cent those of men at the start of the to one of the world’s most unequal societies. reform era to 67 per cent in the cities and 56 Research by Branco Milanovic, one of the per cent in the countryside.61 world’s leading experts on inequality, shows that in the period 1988 to 2008, income The drivers of this regression from the inequality in China rose far more rapidly than status of women during the Mao period are in any other region in the world.56 a greying population and the demographic

32 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? imbalance produced by the controversial China’s ranking in the World Economic one-child policy, when male children were Forum’s global gender gap index has favored over females, resulting in widespread plummeted, from 57th out of 139 countries in abortion and infanticide. As a New York 2008 to 103rd in 2018.64 China once enjoyed Times report explains, “Chinese women are one of the highest rates of female labor being squeezed out of the workplace by force participation in the world, with nearly employers who penalize them if they have three in four women working as recently children, and by party officials urging them as 1990. Now the figure is down to 61 to focus on domestic life. At the same time, percent, according to the International Labor those who have managed to keep working are Organization.65 increasingly earning less relative to men.”62 What is alarming is that discrimination Gender is now one of the most important against women is now accepted if not factors determining income inequality promoted by the country’s leadership. in China, perhaps more so than even the Mao famously told women that they held up longstanding divide between the cities and “half the sky,” and despite turmoil and the the countryside.63 Over the past decade, persistence of patriarchal traditions, they entered the work force in record numbers and began to enjoy greater rights. Now, in a break with the Marxist ambition of liberating women, President Xi has openly called on women to embrace their “unique role” in the family and “shoulder the responsibilities of taking care of the old and young, as well as educating children.”66 No party leader would have been caught saying something like this in the past, but the breaking of the taboo apparently stems from the male party leadership’s push to raise the birth rate owing to its obsession with China’s looming demographic crisis. It could also be motivated by a desire to meet the gaps in China’s still fragile social security system by shifting much of the burden of care from the state to women and the family.67

Social Protest

An analysis of the political economy of China would not be complete without touching on, even if only briefly, the phenomenon of

Women hard at work in a Seagate factory in Wuxi. social and political protests. Protests are Courtesy of Robert Scobie via Wikimedia Commons. not uncommon in China. Before it stopped

33 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? publishing statistics on “mass incidents” 1250 in 2017. While there were reports of after 2008, such events went from 10,000 protesters and activists being arrested, one in 1994, increasing yearly, with 58,000 in analyst monitoring workers’ actions said 2003, 74,000 in 2004, and more than 100,000 there were “far too many protests to crack in 2008.68 In the three years before he was down on” and in most cases police didn’t get seized by police in 2016, the indefatigable involved.70 According to labor researcher chronicler of protests, Lu Yuyu, and his Elaine Hui, “The Chinese government seems girlfriend, recorded over 70,000 outbreaks of to be aware union reform could help stabilize social and political protest.69 labor relations. To make the [government- linked ACFTU [All-China Federation of Trade Protests range from rural actions against Unions] and its affiliates more responsive land grabs by local authorities in rural areas to workers’ grievances, during the 2000s to workers’ strikes to environment-related the government pushed for workplace mobilizations. While repression appears unionization, especially in foreign-owned to be the dominant response to peasant Fortune 500 companies, through a top- protests, there have also been concessions, down effort. Following a major strike wave such as “people’s centered governance” in 2010, the government tried to strengthen focused on providing better social welfare enterprise-level union organizations, along benefits and restraining local officials during with implementing pilot workplace union the Hu Jintao-Wen Jiabao era. Authorities elections and collective bargaining.”71 There have been more careful in the cities, where has, however, been a pushback under Xi.72 concessions have also been part of the government response. In a landmark action, Environment-related protests have also for instance, Honda’s local affiliate, with the been widespread, though most of these agreement of local authorities, gave in to take place on the internet. Owing to its workers’ demands in Guangzhou in 2010 large support from the middle class, the after the workers’ strike spread to other government is perhaps more sensitive in sectors of the automotive industry. the area of environment than in its handling of labor and peasant protests. Civil society In 2018, with the economy slowing down, organizations and personalities have been there were 1700 workers’ actions throughout allowed much space to air grievances, China protesting mainly against unpaid although this is narrowing. Perhaps the wages and factory relocations, up from greatest achievement of environmental

IN 2018, WITH THE ECONOMY SLOWING DOWN, THERE WERE 1700 WORKERS’ ACTIONS THROUGHOUT CHINA PROTESTING MAINLY AGAINST UNPAID WAGES AND FACTORY RELOCATIONS, UP FROM 1250 IN 2017.

34 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? activists has been pushing the government communities or groups. As a rule, protesters to come out with a new raft of laws, action don’t reach out across localities to other plans, and regulations that provide a groups with “systemic demands.” Some framework for tackling air pollution. This analysts have wondered why there are so is not just talk. Beijing cancelled 85 new few protests calling attention to conditions coal-fired power plants and pledged not of great inequality, as in other countries. to approve new projects until 2018 in as There is, of course, fear of repression, like the many as 13 provinces, though as Economy massacre at Tiananmen Square in 1989. points out, “the other eighteen provinces But perhaps equally or more important, some and regions—primarily in the interior and point out, is that while inequality has indeed western parts of the country—presumably grown, incomes have risen even faster. have greater latitude to consider new coal- Average per capita income in China rose fired power plants.”73 Nevertheless, the between 1988 and 2008 by 229 per cent, ten government has made “undeniable progress times the global average of 24 per cent and in advancing clean energy production and far ahead of the rates for India (34 per cent) consumption,” says Elizabeth Economy, who and other developing Asian economies.76 closely monitors of China’s environmental “For most of the past three decades, all boats sector, and this has been in response to have been rising,” one analyst speculates, citizen action.74 “and most people pay more attention to their own boat than the boats that have risen The government’s oscillation between higher…They may, in short, have bought into the iron fist and the velvet glove reflects Deng Xiaoping’s motto early in the reform era its nervousness about manifestations of that ‘some people and some regions should instability. In fact, the Communist Party be allowed to prosper before others’.”77 is obsessed with stability, which is the reason party and government officials often go to great lengths to ensure that worker Conclusion discontent does not spill out into the streets by making concessions, like keeping loss- China’s economy has a number of making state enterprises on life support. As vulnerabilities. McMahon observes, “Regardless of how a successful official has been at generating One is regional disparity, stemming from a growth, one protest above a certain size long-held policy of pushing some regions to automatically puts an official’s promotion develop ahead of the rest, which favored the prospects on ice. Social instability, broadly southeastern coastal region that was easiest defined, is the one thing that renders all to integrate into the global economy. others achievements moot, providing officials with the motivation to keep A second is overcapacity, which stems companies alive, their workers employed, from the decentralized character of China’s and their pensions intact.”75 capitalist development. This has encouraged excessive investment as local authorities Despite the party’s fears, the vast majority of competed with one another to attract protests are single-issue affairs, motivated investors to build industrial enterprises, by concerns about the welfare of local resulting in much duplication and waste.

35 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? A third point of vulnerability is a destabilized Environmental and social inequalities financial sector marked by massive debt have generated widespread protests. on the part of SOEs, runaway speculation The authorities have dealt with these in land, a roller coaster stock market, outbreaks with a mix of repression and and an elusive, growing shadow banking concession, being worried about the image system. of being associated with the emergence of large-scale protests, which would affect their A deteriorating environment is a fourth chances of promotion in a party state system source of growing crisis, though there that values social stability above all. Despite have been undeniable advances in the their frequency, however, the impact of government’s programs to deal with some protests has been limited since they usually critical problems like air pollution. involve individual or group grievances that are not translated into challenges against the Perhaps the fifth source of crisis might be system of rule. A key reason for this may be the most intractable. This is rapidly growing that although inequality has risen in China, social inequality, including gender-based individual incomes have risen much faster, inequality, which stems from formal and and people experiencing their boats rise informal reversal of the gains women made rapidly might be less concerned with other during China’s socialist period. boats rising much faster than theirs.

36 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? V THE POWER BLOC

Internal power struggles are a central factor which is the reigning power bloc, it might be in shaping China’s relations with the rest useful to look at the struggle over economic of the world. At the same time, China’s policy over the last three decades. global presence has had a feedback effect on domestic politics. One cannot fully One identifiable faction was constituted understand the domestic power equation, for by the liberalizers, who were committed instance, without taking into consideration to transforming the economy into a more the major weight of groups, agencies, full-fledged capitalist economy marked by a regions, and individuals associated with stronger role for market forces, which they China’s highly successful export-oriented believed would promote a more efficient manufacturing strategy. allocation of resources. Thenthere was the set of interests that had developed Who rules China? From one perspective, the and congealed around the export-oriented answer is simple: the Communist Party. strategy that had made China the “world’s manufacturer.” This coalition of elites, whose Reality, however, is not that simple. It is geographical base was the coastal provinces perhaps best to describe the party as the of southeastern China, writes Hung, “had canopy within which different party factions germinated after China’s initial opening to or coalitions associated with certain policies, the world…grew in financial resources and ministries, regions, and enterprises struggle political influence with the export boom for dominance, though within limits imposed and became increasingly adept at shaping by the party structure, traditions, informal the central government’s policy in their understandings, and the internal power favor. Their growing leverage in the central equation. The dominant coalition may be government’s policy-making process secured termed the “power bloc,” by which is meant the priority given to enhancing China’s export the group or coalition of groups whose competitiveness and the country’s attraction interests the country’s political economic to foreign investment.”78 A third grouping configuration primarily serves. To determine was made up of party leaders, government

37 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? officials, and SOE managers from the western that had subsidized the export lobby as well and inland regions that felt that their areas as ending the virtual monopoly on bank loans had been left behind by an economic growth enjoyed by the latter. Not only would the process. Complex and fluid alliances marked allocation of resources be more efficient, they the relations of these groups with one argued, but millions of long-exploited savers another, though the two main rivals appeared would benefit, as would private businesses to be the liberalizers and the export lobby. that had no access to credit from the state banks. The export lobby, however, was able The export industrial complex or “coastal to slow down reforms, and they were helped elite” developed into a powerful force over in no small measure by the conflict between time, and its main argument in debates the liberalizers at the People’s Bank of China among the leadership was that China’s and anti-reformists ensconced in the big very success as an exporting superpower state banks. As Eswar Prasad points out, meant that economic policy should not harm “The big banks, in tandem with the large the interests and policies that had been state-owned enterprises and provincial responsible for this. They saw many of the governments that they bankroll, have been liberalizers’ initiatives as doctrinaire and fierce and powerful opponents of reforms. harmful western liberal prescriptions. The system, as it is structured, works well for these groups, which hardly makes them The lobby included government planning eager for greater liberalization.”79 bodies like the National Development Reform Commission and the Ministry of Finance, The leadership of President Hu Jintao and both of which had fathered the strategy Premier Wen Jiabao that took over in 2002 of export-led industrialization; export- tended to conciliate the export lobby but at oriented state and private enterprises; local the same time, it was worried that China’s government and Communist Party bodies economy had become too dependent on in the coastal provinces; and, not to be exports and was sensitive to criticisms that underestimated, state-owned construction the export lobby was cornering most of the firms whose infrastructure projects country’s real and financial resources, leading undergirded the export-led strategy. to greater inequality in the country and serving as kindling for social protest, to which This is not to say that the liberalizers and the the Communist Party was extremely sensitive. export industrial lobby did not share some interests and points of view. Both favored When the Chinese growth rate began to dip as China’s cheap labor policy. Both supported a consequence of the global financial crisis, the break-up of the institutions of job security the Hu-Wen leadership rolled out the $585 of the Mao era, including the withdrawal billion stimulus program, which, in relation of state subsidies for loss-making state to the size of the economy, was bigger than enterprises that had not adapted to the the concurrent $787 billion stimulus that export-led strategy. Financial policy was, the Obama administration injected into the however, another matter. Here the battle lines US economy. The aim was not only to serve were drawn. Reformers wanted a more rapid as a countercyclical instrument to reverse reform of the financial system, pushing for economic contraction. It was also meant liberalizing the low interest rates on deposits to trigger a macroeconomic reorientation

38 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? of the Chinese economy from export-led a retreat to socialism in the sense of to domestic-led growth by increasing the prioritizing the interests of those groups that purchasing power of consumers. The move had been left behind by China’s export-led was also meant to address the complaints growth. Alongside workers and peasants, of party and state officials from the inland these disadvantaged sectors included the provinces, whose state enterprises were less small and medium entrepreneurs serving internationally competitive, that their regions local markets and the general population had been left out of the boom. In fact, even in their roles as savers and consumers—in before the crisis, the Hu and Wen leadership short, as the economist Hongying Wang had already taken some steps to address put it, all those who have “suffered from the these inequalities. financial and public finance systems that have deprived them of their fair share of the Western analysts like Barry Naughton have national wealth.”80 credited the stimulus program for saving China from spinning into recession while at Since they controlled the channels through the same time faulting it for being the key which trillions of renminbi could be quickly event that put an end to the big push towards deployed—the big state banks, local economic liberalization that was pushed governments, and big state and private by Prime Minister Zhu Rongji at the turn of enterprises engaged in infrastructure—the the century. Their argument is the stimulus export lobby didn’t just neutralize the plan involved a lapse into the “old socialist ways,” to make domestic consumption the cutting where funds were indiscriminately funneled edge of the economy. It was also able to by the banks to the big state enterprises hijack the massive stimulus program that had and local governments in order to have been intended to place money and resources an immediate impact, and this resulted in in the hands of consumers. According to inefficient, wasteful spending, revived the statistics Wang cited from Caijing Magazine, specter of nonperforming loans for the big some 70 percent of the stimulus funds went Chinese state banks which the reforms of to infrastructure while only 8 percent went Zhu Rongji had banished, and brought back to social welfare expenditures like affordable the worst features of state management. housing, healthcare, and education.81

These analysts are correct that the focus on Under Xi Jinping, who took over as president rolling out the stimulus froze liberalization in 2012, the strategy has apparently been initiatives. But what transpired was not to impress the world with the rhetoric of

UNDER XI JINPING, WHO TOOK OVER AS PRESIDENT IN 2012, THE STRATEGY HAS APPARENTLY BEEN TO IMPRESS THE WORLD WITH THE RHETORIC OF LIBERALIZATION BUT, IN PRACTICE, GOING IN THE OPPOSITE DIRECTION.

39 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? liberalization but, in practice, going in the struggling for dominance—among them, opposite direction. As Economy points the coastal coalition, the faction pushing out, “the Xi-led government is…maintaining the interests of the inland provinces, the and even enhancing the role of the party in SOE infrastructure-industry lobby seeking the economy. It is intervening to protect an outlet for overcapacity, and state banks the economy from the vicissitudes of the looking for a way to stop the unprofitable market, shielding it from foreign competition, SOEs’ drain on their resources. The BRI and more actively intervening in decision- has, in fact, been promoted as a “win-win” making at the firm level.”82 SOEs have solution for all factions. played a critical role in the export-oriented strategy, but many have been regarded as To be effective, the interests of the power inefficient and targeted for radical reform bloc must be seen as advancing the general by the liberalizers. Under Xi, says Economy, interest. This is where vision and ideology “far from reducing the role of SOEs in the come in, and in this area, Xi Jinping’s economy and the party’s role in SOEs, the “Chinese Dream” has played a critical role state has elevated their importance as in legitimizing his faction’s claim to party national champions and intensified the role of and state leadership. Elements of this the party in SOE decision-making.”83 dream include the doubling of incomes by 2020, comprehensive national economic That the interests of the coastal export and military modernization, rejuvenation of industrial complex have been enhanced under the Chinese nation, and regaining China’s Xi is perhaps not surprising, for as Hung historic place in the international system points out, Xi Jinping, like former President through such programs as the Belt and Jiang Zemin, has come from the coastal Road Initiative. This is not to say that Xi is export industrial lobby, and their promotion not sanguine about achieving these goals; to the party-state power center “definitely it is simply to acknowledge that one of their increases the leverage of the coastal local functions is to ensure legitimacy for the elite, many of whom are the top leaders’ reigning power bloc. former proteges and acquaintances, to lobby for policies in their favor.”84 This is not to say that other interests and policy preferences Conclusion are not promoted by the dominant bloc. Coalition politics are fluid and there are Economic policy has been a central area of issues with cross-cutting appeal to a range struggle in China over the last three decades. of forces that may not see eye to eye on all While there have been several factions issues, such as the necessity of purifying involved in the policy struggle, the two main the party of corrupt elements or checking rivals have been the liberalizers and the the most socially destabilizing effects of the coastal export industrial bloc. Basing its market with safety nets. legitimacy on China’s export success, the latter has been able to channel resources to A new phase in coalition politics may have its preferred regions and policies. taken place since 2013, with the launching of the BRI. The BRI might be an effort The $585 billion stimulus in response to reconcile the different interest groups to the 2008 global financial crisis was a

40 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? major bone of contention from which the The launching of the BRI in 2013, however, coastal export coalition emerged victorious, might represent a new phase in coalition being able to corner the bulk of resources politics, with the project sold as a win-win unleashed by the stimulus. The liberalizers situation for all key interest groups. This have yielded even more ground since ties in to Xi Jinping’s vision of a rejuvenated Xi Jinping, who comes from the coastal and comprehensively modernized China coalition, came to power in 2012. While Xi that has regained its place in the sun. This has adopted the rhetoric of liberalization, “dream” must be seen not simply as device the implementation of his policies has for mobilizing national energies in the desired favored the interests of the export directions but also as a means to legitimize industrial bloc. the country’s power bloc.

41 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? VI CHINA’S GLOBAL REACH: FOLLOWING IN THE FOOTSTEPS OF THE WEST?

Since the late 1990’s, to feed its people as copper, oil, and coal. In 2012, crude oil and the export machine, China’s SOEs accounted for 70 per cent of African exports and private companies have fanned out to China and other raw materials came throughout the developing world seeking to 15 per cent.85 While iron ore and oil are raw materials, food, markets and profits, important, a huge part of Latin America’s and entering into trading arrangements exports to China has been food products with other governments, if not themselves like soybean, sugar, coffee, and animal engaging in direct investment to secure and feed. At the beginning of this decade, process these commodities. Brazil provided China with approximately 45 percent of its soybean imports and Argentina accounted for another 30 Trade percent.86 With its trade war with the US, China has become more dependent on Brazil Africa, Latin America, and Southeast Asia for soybeans, and it is now importing more have, over the last 20 years, have seen the soybeans from Brazil than the US.87 heavy footprint of the Chinese economy. To governments in these economies, Since 2009, China has outstripped Japan, this has been largely positive, and they the EU, and the US as the largest trading undoubtedly are right that Chinese demand partner of the Association of Southeast for their raw materials, food, and industrial Asian Nations (ASEAN).88 Two-way trade inputs has been an important contributor soared ninefold, from $4.8 billion in 2002 to to their growth, especially during the $446.3 billion in 2013.89 However, the trade pre-2008 period. patterns established with China are a bit more complex than those of other regions. A division of labor emerged among the While most Southeast Asian countries, like different areas of the world in terms of most developing countries, export mainly provisioning China’s economy. Africa has raw materials and food to China and import specialized in providing raw materials such finished manufactured goods, an increasing

42 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? portion of their exports are components Second, while China’s edge in low-cost for finished goods. For instance, in the manufacturing has destabilized the case of the Philippines, in 2018, electronic manufacturing sectors of countries like components accounted for 55.1% of total Mexico and Brazil even within the latter’s exports, with “other” manufactured goods domestic markets, trade with China has accounting for a 6.3% share and machinery been a boon to many developing countries and transport equipment for 4.8%.90 by allowing them to diversify their trade These figures reflect the fact that China has from dependence on western markets. become the center of a regional production There is a great deal of truth in the network encompassing both the developed statement made by Buddy Buruku, policy countries of Northeast Asia and the less adviser of the Ghana-based African Center developed Southeast Asian economies. for Economic Transformation: “African Under pressure from competition from leaders have to realize we Africans are in a China in finished manufactured goods, unique position we never enjoyed before. Asian economies chose not to go head Africa has an abundance of resources that to head with China on these goods but China does not have much of. So Africa painfully restructured their industries to is the girl China has to court. There is provide components for goods that were a power we have as Africans we are not assembled with cheap labor in China. exercising. Realizing that will make for As Hung writes, with capital for labor- a better [relationship] over time.”92 To intensive assembly fleeing to China, some analysts, this statement underplays “most Asian economies increased the the benefits accruing to Africa since weight of their export of high-value-added many African governments (and Latin components and parts (e.g., for Korea and American governments) have been able to Taiwan) and capital goods (e.g., for Japan) extract significant royalty payments from to China, where these capital goods and commodity exports or commodities-for- parts were employed and assembled into infrastructure exchange arrangements with finished products to be exported to rich Chinese state firms. countries’ markets.”91 Third, China has been a strong advocate While the relations of China with the for developing country positions in the developing countries appear to follow World Trade Organization, when it comes to classic “colonial” or “neocolonial” patterns, agricultural trade, “special and differential whereby the latter are mainly raw material treatment” of developing economies, and and agricultural exporters and importers of protection from EU and US efforts to tighten manufactured goods, it is important to bear intellectual property rights, bring down in mind a couple of things. investment barriers, weaken domestic regulations, do away with industrial policy, First, unlike the trade relations of developing and subject state enterprises to greater WTO countries with the West, which were initially discipline. Despite its status as the world’s created by force before they congealed into largest economy, China’s oft-repeated claim structural features, China has not engaged that it is still a developing country with in forcible and violent imposition of its developing country interests has a strong trading patterns. basis in fact.

43 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Investment projects. One is a 2806 kilometer-long oil and gas pipeline, estimated to have cost $2.5 Like trade, Chinese investment in the billion, linking Yunnan to the coastal state of developing world has boomed over the last Rakhine. Another is the 6000 MW Myitsone two decades. China, as Kevin Gallagher Dam in Kachin state, in which China was notes wryly, is now“the world’s largest expected to invest $3.6 billion before it was development bank.” 93 Two of its agencies, suspended owing to opposition among the the China Development Bank and the Kachin ethnic minority.97 According to some Export-Import Bank of China, have provided estimates, at least 45 Chinese corporations nearly a trillion dollars’ worth of financing have been involved in approximately 63 to foreign countries since the early 2000’s. hydropower-linked projects in the country.98 Additionally, it has negotiated or pledged Chinese state corporations have also been some $230 billion in development in involved in two multibillion dollar scandal- bilateral and regional development funds ridden port-upgrading and industrial park across world.94 projects in Malaysia,99 and a controversial $1.6 billion hydroelectric plant in Sumatra, Including loans and direct investment, Indonesia, and two agreements totaling China’s cumulative investment in Africa about $333 million to build dams on Luzon totaled $40 billion in 2012, including $14.7 island have been signed with the Duterte billion in direct investment. According to government in the Philippines.100 Beijing, there are more than 2,000 Chinese firms that have invested in Africa.95 Most of the monitoring of Chinese investment has focused on highly visible loans and From 2005 to 2014, China has provided more investments by Chinese banks and state than $100 billion in loan financing to Latin enterprises. Increasingly, however, much American countries and firms, with two major investment has come into China’s neighbors state-owned banks, China Development Bank and other developing countries in the form and China Eximbank accounting for the bulk of what Alvin Camba calls Chinese “flexible” of this. private capital. Many small-scale private textile and garment firms, for instance, have In Southeast Asia, billions of dollars have moved from Shenzen to Vietnam as labor been funneled by China’s state-owned costs have risen in China. Other private banks into infrastructure and related investments are less publicized and less projects executed by Chinese state-owned easy to comprehensively monitor since they enterprises. Southeast Asia is China’s often involve controversial operations such backyard, and it is not surprising that the as massive landgrabbing in Cambodia, with Chinese government has reportedly spent the connivance of the Hun Sen government, or 1.5 trillion yuan or $240 billion in projects to illegal small-scale mining and shady offshore link Guangxi province to Southeast Asia and gambling operations in the Philippines. plans to spend $80.6 billion in infrastructure As noted by Camba, perhaps the leading in Yunnan “to create a gateway to Southeast analyst of Chinese flexible capital, much Asia.”96 On the other side of the border, flexible Chinese capital seeks “to escape the Myanmar has been the recipient of billions whims of the Chinese state.”101 Much capital of dollars for infrastructure and related entering the Philippines, for instance, does

44 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? not come directly from China, but is raised the level of Chinese aid is positively correlated by borrowing from capital markets like Hong with transitions to democracy.104 This is an Kong by Chinese nationals who then funnel it issue that must be probed further. to the Philippines, sometimes with the aid of Filipino-Chinese intermediaries.102 Xi Jinping’s Second, not being itself a democratic regime, push for more centralized control over private it is hardly to be expected that the Chinese capital has also apparently pushed many government would limit its loans and of the bigger private capitalists to support investments only to democratic governments. these smaller enterprises, with much money Democracies, with their inherent complexities transmitted via the shadow banking system.103 when it comes to decision-making, are not that legible to Beijing which is much, much more familiar with the top-down processes Criticisms of Chinese Investments of authoritarian rule. Much, much more questionable in this regard is the solid Support for Autocratic Regimes. As with its support given by the United States to a trade relations, there have been criticisms bloody dictatorship like Saudi Arabia, even of Chinese investment. One criticism, as it has set itself up as a champion of voiced by organizations concerned with democracy, as it did during the administration labor and human rights, is that it does not of President Barack Obama and all preceding attach human rights conditionalities to its administrations, Democratic or Republican. loans and investments, thus helping prop up corrupt authoritarian regimes such as that Third, democracy is not a guarantee that aid of Robert Mugabe in Zimbabwe and Joseph will be put to good uses. When China has Kabila in the Democratic Republic of the provided support to some democracies, its Congo. Other criticisms have to do aid or loans have become enmeshed in the with labor and environmental abuses by corrupt politics of the recipient government, Chinese firms and their engagement in as in the case of Chinese aid to the Jacob economically destabilizing activities or Zuma government in South Africa and the outright illegal operations. administration of Gloria Macapagal Arroyo in the Philippines.105 On the question of Chinese loans and investments helping to prop up dictatorial Fourth, it is arguable that the indirect regimes owing to Beijing’s refusal to attach consequences of China’s not attaching human rights and democratic conditionalities human rights and democratic rights to its loans out of respect for national conditions to its loans are much less sovereignty, there are several things to damaging than the direct comprehensive consider. First of all, while there are instances structural consequences of invasive where this is true, the claim does not hold as a neoliberal conditionalities attached to bilateral general rule according to some researchers. It or multilateral loans by western governments might be worth pointing out that investigation or western-dominated international agencies. by Julia Bader, has, in fact, come out with the In this regard, It is now accepted that counterintuitive finding that “China’s economic economic policy conditionalities attached to cooperation appears to have unexpected World Bank and International Monetary Fund positive effects for democratization,” that is, loans and grants contributed to stagnation,

45 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Activists and analysts allege that controversial Kamchay Hydroelectric Dam in Cambodia benefits mainly local elites. Courtesy of International Rivers. greater inequality, and greater poverty in large for example, in the case of the Kamchay swathes of Latin America and Africa in the Dam in Cambodia and a number of energy 1980’s and 1990’s.106 infrastructure projects in Ghana.107

Chinese investments and their social and There is conflicting evidence on whether the environmental impacts. On the question practices of Chinese enterprises are worse of labor abuses, environmental crises, and than those of western corporations. Certainly, economic and social destabilization, again, western companies engaged in extractive the charges are valid. There are many and related activities, such as the Australian- reports, many of them undoubtedly true, Canadian mining giant Oceana Gold in El of abusive labor practices when it comes Salvador and the Philippines, have records to local workers and the displacement of that would compare with, if not surpass in the latter by imported Chinese workers. notoriety, those of Chinese firms.108 That a number large-scale projects financed and implemented by China have Moreover, Western transnational firms have many drawbacks, including the fact that increasingly taken to subcontracting their benefits are being cornered only by Chinese cheap-labor and polluting operations to state enterprises and local elites, to the enterprises in developing countries, so that disadvantage of the majority of the rural the comprehensive global impact of their population, have also been well documented, value-chains, in terms of labor exploitation

46 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? and environmental pollution in the Africa, Latin that Chinese state firms are beginning to take America, and Asia outside China is probably seriously complaints about their behavior much greater than those of a limited number and considering putting in place some of Chinese state enterprises. It has been reforms already implemented domestically.111 shown, for instance, that “carbon emissions This having been said, however, the trend arising from the global supply chains of the observed by some analysts is for Chinese European pharmaceutical industry are about state firms to behave in ways “no different ten times as high as its emissions from direct from other large multinationals operating in operations. A similar picture is observed the global South.”112 for water consumption (about three times as high) and air pollution (twenty times as The foregoing considerations have been high).”109 In the countries included in China’s brought up not to excuse bad or questionable Belt and Road Initiative, for instance, “US and practices on the part of Chinese state EU consumers are responsible for 30% of the enterprises but to place them in perspective, carbon emissions in BRI countries through especially in relation to the practices embodied carbon flows.”110 of western corporations and western- dominated official agencies like the World The bigger problem for both western and Bank and the International Monetary Fund, Chinese enterprises is the dynamics of which have a much longer record in their capitalism, where the search for profit is the dealings with the global South. main driver of wage rates and processes of production that have a negative impact Chinese private capital and its impact. on the environment. But here, one can While the focus of many analysts has been make the argument that Chinese state on Chinese state enterprises, a great deal enterprises are better equipped to make of social and environmental damage has positive reforms in these areas since they stemmed from the operations of Chinese do not operate only on the law of value but private capital, which has been accused of of also of other considerations like social harsh exploitation of labor. In Zimbabwe, stability, as they do within China, where even Zambia, and the Democratic Republic of when unprofitable, enterprises are kept alive, Congo, the chief culprits of labor abuse in wages are maintained at decent rates, and the mining industry are small Chinese mining communities are not disrupted for fear of companies.113 Small and medium private provoking instability. There are, indeed, signs capital is also engaged in criminal activities

WHILE THE FOCUS OF MANY ANALYSTS HAS BEEN ON CHINESE STATE ENTERPRISES, A GREAT DEAL OF SOCIAL AND ENVIRONMENTAL DAMAGE HAS STEMMED FROM THE OPERATIONS OF CHINESE PRIVATE CAPITAL, WHICH HAS BEEN ACCUSED OF HARSH EXPLOITATION OF LABOR.

47 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? or questionable activities like land grabbing, commodities, being part of what he called illegal mining operations, and internet “international capitalist associations” that gambling. They have also triggered socially provide the political canopy for economic disruptive processes like uncontrolled exploitation, and the territorial redivision inflation of real estate prices in the host of the world by force—China lacks the fifth societies. These are to a great extent outside element. Lenin’s stress on this dimension the control of the Chinese state, though there parallels and reinforces our contention that might be corrupt officials involved in the the employment of force, coercion, and facilitation of these businesses. violence in support of economic interests, whether formal or informal, overt or covert, is Indeed, the Chinese state may want to curb a central consideration in judging if China is these activities. In the case of offshore an imperial force in the image of the West. gambling in the Philippines, for instance, Chinese operators serving mainland gamblers Force and violence, which were so central in fled to the Philippines owing to tighter forging the trade and investment relations regulation of gambling in Macau, the only of the United States and Europe with place in China where casinos are legal. the developing world, have been absent As a result of its electronic subversion of the in China’s 25 years of global trade and gambling ban in China, which has intensified investment expansion. One simply cannot with the anti-corruption campaign of Xi find equivalents of the violent scramble for Jinping, Beijing has pressured the Duterte colonies that the western powers pursued in government to close down offshore gambling the late 19th century in Africa, nor instances casinos.114 This has, however, been so far of the gunboat diplomacy that both Britain largely unsuccessful since online gambling is and the US resorted to in Latin America. a profitable business for moneyed interests There have been cases of abuse of labor, supportive of President Rodrigo Duterte, environmental destruction, and preference contributing $184 million of the country’s total for Chinese over local workers, but we see revenue from gambling of $2.92 billion.115 nothing in China’s record that matches the Central Intelligence Agency’s covert actions to overthrow Jacobo Arbenz in Guatemala, Assessing China’s Mossadegh in Iran, and Salvador Allende in Global Presence in the Light Chile in the second half of the 20th century. of Lenin’s “Imperialism…” China’s neighbors have little fear of China Lenin’s Imperialism: The Highest Stage of mobilizing for intervention in the event Capitalism may seem to many to be dated, of an investment dispute, and this is not but his checklist of what distinguishes an only because it does not have the military imperial power might be a useful theoretical capabilities to do so but because intervention tool for evaluating China’s role in the is simply not part of China’s economic world.116 Of the five essential features that diplomatic repertoire. China’s army lay define an imperial power—the dominance just across the border, but the Thein Sein of monopolies, the merger of finance with government in Myanmar did not even take industrial capital, the central importance of the prospect of military intervention into its export of capital alongside its export of consideration when it abruptly cancelled

48 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? The village of Tang Hpre village relocated for the Myitsone Dam in Myanmar. Protests by the Kachin people forced the Myanmar government to suspend the project. Courtesy of Rebecca via Wikimedia Commons.

the construction of the Chinese-funded This is not to say that China never uses Myitsone Dam in 2012. Indeed, when force in its relations with other countries. Yangon opened up to the world in 2011, It does, but when it has, this has for the Beijing acknowledged that it lost much of most part not been to advance economic or the economic influence it had built up during corporate objectives but to assert its side Myanmar’s period of isolation, but there in border disputes, push what it considers was never any consideration on its part to historical sovereign rights, or pursue restore its preeminent position by force or defensive strategic goals. One must flag intimidation.117 Nor was the deployment here, however, that strategic politics and of force entertained when two nearby economic self-interest have come together countries, Pakistan and Nepal, cancelled in a very disturbing way in China’s behavior multibillion dam projects that these two in the South China Sea or West Philippines governments had entered into with Chinese Sea. This is, however, a special case, the state enterprises, in the first case, because of implications of which will be taken up below. objectionable conditions, and in the second because of the lack of competitive bidding.118 The Broader Context In contrast, Latin American countries, such as Venezuela, have always factored in the At this point, it is critical to bring in the possibility of US intervention, not only by broader context for assessing the impact direct gunboat diplomacy but by covert action of China’s trade and investment activities and support for opposition forces when they in the global South. In contrast to western nationalize US firms or adopt progressive institutions and corporations, Chinese capital economic policies not sanctioned by the US. has had only about 25 years of “going out

49 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? into the world.” One can say that it is still however, factor in environmental impacts, engaged in the early phase of a learning so more research is necessary for a truly curve where one can expect many mistakes comprehensive assessment of the impacts to be made. The reality is that, for all its of Chinese investment—a consideration that flaws and missteps, China’s trade, lending, we will take up more fully below, when we and investment push has been a net positive discuss the Belt and Road Initiative. for developing countries. It has given them alternative markets and an alternative capital It is true that Chinese loans carry an interest source to western private capital and to rate above that which accompanies loans loans from multilateral agencies with all from the World Bank, regional development their growth-throttling conditionalities. In banks, and bilateral donors like Japan. the much needed area of infrastructure However, China has also engaged in many building, where there is said to be an grossly acts of debt forgiveness or debt cancellation. unmet need of some $3 trillion, China offers This year, it has written off $78 million owed practically the sole source of financing for by Cameroon; in 2018, it wrote off $72 million many countries since western-led financing owed by Botswana and $10.6 million owed by for development has been stagnant for years Lesotho; and in 2017, $160 million worth of now and western agencies attach neoliberal debt owed by Sudan. conditionalities.119 In this regard, China is not just engaged in building much criticized The Rhodium research group found 40 hydroelectric dams and coal-powered plants. instances of renegotiations of debts to China Chinese loans have also been a source of amounting to $50 billion across 24 countries financing for building hospitals, schools, and since 2000. In his 2010 UN Millennium rural roads and bridges. Challenge speech, then Prime Minister Wen Jiabao revealed that China canceled debt Global macroeconomic data indicate that owed by 50 heavily indebted poor countries Chinese lending offers not only alternative (HIPCs) and least developed countries finance but alternative finance that tends (LDCs) worth 25.6 billion yuan ($3.8 billion) to reduce inequality. Research by a as of 2009, and would cancel more in 2010. transnational consortium of analysts from Similarly, in 2018 Xi Jinping said that China leading US and German universities found would write off some interest-free loans to that “Chinese development projects—in Africa’s poorest nations during the Forum on particular, ‘connective infrastructure’ projects China-Africa Cooperation.121 like roads and bridges—are found to create a more equal distribution of economic activity If one takes this broader view, then, while within the provinces and districts where they criticisms from recipient governments and were located. The study also measures the communities of aspects of the activities impact of Chinese development projects on of China’s SOEs that stem from negative economic inequality between provinces and practices must be taken seriously by districts, and here too the results provide Chinese authorities, this process must be grounds for optimism: Chinese government- seen is part of the learning process. One financed projects appear to reduce, rather can only hope the Chinese will derive the than widen, economic disparities between appropriate lessons from this experience regions.”120 This conclusion does not, to avoid having to repeat what Gallagher

50 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? describes as the “tattered past” of western practices that its corporations and development lending.122 agencies made in the first stage of the country’s opening up to the world to persist. Indeed, for all their complaints about the Changing questionable or bad behavior will behavior of Chinese state enterprises in not be easy, but unless China acts soon, their countries, many people do not place these behaviors can congeal into structural China in the same category as western patterns similar to those displayed by corporations. Looking closely at the western corporations. These structures can depictions of China in both the government- then become the mechanisms and avenues controlled and opposition press in a number of domination should a leadership seeking of African countries, one of the more global hegemony emerge in China—a point even-handed studies of China’s role in the that some—not the author—say has arrived continent found that, with Xi Jinping, who is said to be intent on making China supplant the United States as …African media have criticized Chinese the world’s leading power. individuals and corporations for bad behavior; a few Zimbabwean news The behavior of Chinese economic actors articles were found to accuse China of is definitely of great concern, but does this neo-colonialism or portray China as dimension and the related issue of China’s an economic threat, and some South military behavior, which we will take up later, African and Zambian media articles have exhaust our concerns about China’s imprint criticized their governments for being on the global South? Might not looking at too friendly with China, but most articles China’s economic and military behavior have not portrayed China an evil empire and coming to the judgment that they are out to exploit Africa. not reproducing western patterns be too limited a perspective in assessing China’s Although China gets its share of criticism relationship with the developing world? in the African media, apart from a few This is an issue that we will probe further exceptions, the African press did not see in the following section, on the Belt and China as a neo-imperialist nor did they Road Initiative. paint the Chinese in racist colours. So, to the question of whether the African media perceives China as imperialist or neo- Conclusion colonialist, the answer is mostly “no”…Both the state-owned and relatively freer media There is no doubt that many countries have have not depicted China as imperialist. had some negative experiences in their State-controlled media tends to reflect the trade and investment ties with China such views of the government, while the more as environmental damage, destabilization independent media generally reflects more owing to the super-competitiveness of the view of the people.123 Chinese goods, and preference for Chinese over local labor. These perceptions may, however, change if China does not make moves to correct In evaluating these experiences, however, its mistakes and allows the questionable several things must be borne in mind.

51 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? CHINA’S TRADE RELATIONS WITH THE GLOBAL SOUTH HAVE NOT BEEN IMPOSED BY FORCE, UNLIKE IN THE CASE OF THE WEST AND THE SOUTH.

First, China’s trade relations with the global to say that China never resorts to force to South have not been imposed by force and protect its interests, but in those cases when violence, unlike in the case of the West and it has, most of these are connected mainly the South. with border disputes or defensive strategic concerns. It must be pointed out here, Second, the absence of human rights however, that this is not the case in the South or democratic rights conditionalities China Sea crisis, where strategic concerns in its loans may have had negative have been wedded to resource grabbing, an consequences in terms of indirectly issue we shall elaborate on below. propping up some dictatorships but, as noted above, some serious research shows Fifth, having had only about 25 years since no positive correlation between Chinese they “went out to the world,” China’s SOEs aid and lending and the consolidation of have been on steep learning curve, with many autocracies, revealing instead a counter- mistakes and bad practices stemming from intuitive correlation of the former with this learning process. democratization. On the other hand, neoliberal conditionalities attached to Finally, despite complaints about the behavior western loans have consistently been of Chinese enterprises, China is, for the shown to have great negative impacts of a most part, not seen by many in developing comprehensive and structural nature. countries as an imperial or neocolonial power in the image of the West. Third, the negative social and environmental impacts of western corporations are also It is also important to distinguish between likely to be much greater since these are the impacts of state-backed Chinese capital transmitted globally via supply chains as and flexible private capital. The behavior they subcontract many of their operations to of state-backed capital can be blamed on developing country enterprises. the Chinese state, which has the ability to correct it. That of flexible private capital is Fourth, when other countries cancel or go much more difficult for the state to control back on multibillion dollar contracts with since many of the Chinese interests in a large Chinese enterprises, they do so for the most number of private enterprises are hidden part without fear of Chinese retaliation in from view in covert ownership arrangements. the form of military intervention or covert Moreover, a good deal of private capital is operations, again unlike the experience of involved in activities that are criminal and many countries with the West. This not illegal in either China or the host state. When

52 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? the Chinese state does try to halt business act quickly to correct the questionable and activities that it perceives as harmful to deplorable practices of some of its state its citizens, it sometimes finds its desire and private enterprises abroad before they thwarted by the host state, as in the case of congeal into structural patterns that can online gambling in the Philippines. become the mechanisms or avenues for domination should a leadership emerge that Overall, China’s trade and investment is bent on global hegemony. relations with developing countries have been a net positive, providing, as they do, The question is, however, posed: might alternatives to trade, investment, and aid not be the question of whether or not China relations with western countries or is reproducing the ways of the West, while western-dominated multilateral very important, be rather limited in helping agencies that impose growth-strangling us to fully comprehend its impact in the conditionalities. Nevertheless, China must global South?

The Myitsone Hydroelectric Project is located at the confluence of the Mali and N’Mai rivers and is the largest of seven dams (total capacity 13,360 MW) planned along the Irrawaddy, Mali Hka, and N’Mai Hka rivers in Myanmar. Scheduled for completion in 2019, Myitsone was slated to become the 15th largest hydropower station in the world, with installed capacity at 6,000 MW, when construction was suspended by the Myanmar government owing to protests from the Kachin people. Courtesy of International Rivers.

53 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? VII THE BELT AND ROAD INITIATIVE: GRAND PLAN FOR DOMINATION OR STRATEGY FOR CRISIS?

Four international projects have been China is a key actor in the proposed Regional associated with China during the last few Comprehensive Economic Partnership years: the Asian Infrastructure Investment Agreement, which brings together the ten Bank (AIIB), the New Development Bank, members of the Association of Southeast the Regional Comprehensive Economic Asian Nations (ASEAN) with China, Japan, Partnership Agreement (RCEP), and the Belt India, South Korea, Australia, and New Zealand and Road Initiative. All four, but especially in what would be the world’s biggest free trade the last, have been seen as projects meant to bloc, upon completion of negotiations which enhance China’s global economic power. have been dragging on for years since the body was first proposed in 2010. RCEP was First proposed by President Xi Jinping in seen by many to be the answer from China 2013 to fund Asia’s infrastructure needs, the and its close Asian allies to the proposed AIIB has currently 52 member states, with 18 Trans Pacific Partnership (TPP) that had, at US prospective members, and its starting capital insistence, excluded China. is $100 billion. The New Development Bank, also known as the “BRICS Bank,” was set up by It is, however, the Belt and Road Initiative China, Brazil, Russia, and South Africa in 2015 (BRI), for which Xi Jinping has announced a to support development projects in the Global commitment of $1 trillion, that has elicited the South. While some have interpreted these most attention and has been interpreted by moves as China’s effort to supplant the US- some as Beijing’s boldest gambit in its drive dominated multilateral system, Hung asserts for global power. Drawing on the historical that China’s effort to build multilateral banks image of trade routes from China to Europe— “should be seen not as a challenge to the one the overland “Silk Road” via Central existing system of international finance, but as Asia, the other the “Maritime Silk Road” a way to supplement that system that allows that had southeastern China as the starting China to sacrifice some of its discretionary point—Beijing offered to finance a plan of power to obtain the cover and legitimacy that infrastructure building across regions that it other participating countries can provide.”124 claimed would lead to collective prosperity.

54 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? One analyst describes the BRI as a “well BRI and the Overcapacity Problem thought-out Chinese grand strategy… [designed] to reclaim [China’s] ] geopolitical To some other analysts, however, the BRI dominance in Asia ... [challenge] US is really an effort to place a superficial dominance and ... create a Chinese- image of order to crisis and chaos. The centered order.”125 The aim of this “offensive crisis is the overcapacity problem that is nationalism,” writes Jonathan Holslag, is now the key drag on the Chinese economy, to “predate on Europe’s internal market” forcing SOE balance sheets into the red, and, through massive investment, “enmesh and making their survival dependent on Eurasia and Africa into a dense network of the permanent infusion of funds from the trade, capital, transportation, communication, state banks, resulting in even more massive and information.”126 For the White House indebtedness. Externalizing China’s surplus Office of Trade and Manufacturing Policy capacity crisis is the key drive behind the headed by Peter Navarro, arguably the BRI, earlier known as the One Belt, One Road most influential economist in the US today, (OBOR). As Lee Jones puts it, the BRI “is the BRI is “a Chinese strategy to dominate not some new invention of Xi Jinping…[It] much of the infrastructure, resources, and is really a rebranding exercise, or a fresh trading routes of the world” that is one spur, to a process of externalisation of dimension of Beijing’s strategy of “economic surplus construction capacity that has been aggression.”127 happening for well over a decade.”128

One Belt, One Road transmogrifies into six or seven as provincial and local authorities battle for visibility, funding, and influence in Beijing. Courtesy Lommes via Wikimedia Commons.

55 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? As Jones and Zeng explain, China’s of the BRI and the AIIB. “It is not true that overcapacity problem, already serious before China is simply altruistic,” writes Xiao Ren. the global financial crisis, was exacerbated by “At present, the overall Chinese economy the massive $586 billion stimulus that the Hu is undergoing a restructuring process. As Jintao-Wen Jiabao leadership put together in its economy slows down and evolves, the 2008 to counter the effects of the implosion country needs to find new markets for its on the domestic economy: capital goods.” Thus, infrastructure projects promoted by the AIIB “will help to transfer The real impetus for expanding the overcapacity of production….”130 infrastructure programmes through OBOR [One Belt, One Road] was the Also to be noted is that Holslag, who sees long-term fallout from the 2007–2008 the BRI as a grand strategy, admits that global financial crisis. China rode out overinvestment and overcapacity are its the crisis only through a US$586bn central drivers, though he hastens to add that stimulus package, mostly involving China seeks to “bend” these “weaknesses” local government borrowing to finance into “strengths.”131 Also of interest is that infrastructure projects. By the early 2010s, while the White House Office of Trade and the stimulus was spent and many local Manufacturing Policy paper cited earlier governments were virtually bankrupt. denounces China’s coordinated global Overcapacity exceeded 30% in the iron, “economic aggression,” it admits in a steel, glass, cement, aluminium and power footnote that “It is unclear whether China generation industries. Many SOEs faced deliberately uses overcapacity to gain control a major profitability crisis, with returns on of industries. A competing view is that such domestic infrastructure turning negative. overcapacity is the result of factors within Meanwhile, Chinese banks faced their China beyond the central government’s own over-accumulation crisis, with control, e.g., the entrepreneurial efforts of US$3tr in foreign exchange reserves and local and provincial governments to stimulate dwindling domestic lending prospects. growth in their jurisdictions.”132 For these interests, OBOR represented an opportunity to internationalise their Looking more closely at the surplus capacity domestic surplus capacity.129 problem, it is important to point out that the fallout from the 2008 stimulus merely Interestingly, there are Chinese academics made it more acute rather than created close to the government who do not hesitate it. The essential cause lies in the main to claim that overcapacity is a central driver features of economic decision-making

THE BRI IS REALLY A PROJECT TO SOLVE CHINA’S OVERCAPACITY PROBLEM THAT ENDS UP EXPORTING ITS ENVIRONMENTAL CRISIS.

56 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? in China, earlier alluded to. One is the in order to grab part of the spoils. fragmentation of authority, or the dispersal Only 14 provinces were invited to the of authority “to numerous, often overlapping, NDRC’s initial OBOR symposium in agencies, ministries and quasi-independent December 2013, indicating a relatively regulators.”133 Another is the “decentralization tight circle of beneficiaries. Excluded of power, resource control, and policy provinces, however, quickly lobbied making and implementation, particularly for inclusion,through forums like the to provincial governments, creating a ‘de NPC. Provincial universities and think facto federal’ state,” whereby “subnational tanks were encouraged to demonstrate governments can ‘adjust’ national policies locales’ historical links to the ancient to local circumstances, producing constant silk road–generating the aforementioned multi-level bargaining around, and substantial publications boom. Local media were non-compliance with, central initiatives.”134 also enlisted, leading to a profusion of A third is the “internationalization” of formerly stories mentioning OBOR, from 543 in domestic actors, such provincial authorities 2014 to 5935 in 2015, with coverage and local SOEs that come into contact and in virtually every provincial outlet. For establish relations with foreign governments example, Shaanxi and Henan provinces and international agencies separate from the waged an intense public battle over relations of the central government with which of them contained the start of the these bodies.135 historical silk road. Competition over the MSR’s ‘starting point’ was even fiercer, with rival claims from Fujian, Jiangsu, BRI Rhetoric and Reality Guangdong and Guangxi. Provinces with weaker claims invented ‘starting points’ The upshot is that while Xi articulated BRI linked to geographical locations or as part of his vision for the “rejuvenation” commodities, like porcelain or tea, then of China, the content of BRI was filled with even squabbled over these. Shandong projects by provincial authorities, SOEs, and and Hebei, for example, both claimed national ministries competing for funds and that their cities, Qingdao and Huanghua, bureaucratic power. Rather than the top- were the ‘northern starting point.’136 down planning that was the image of the BRI in the West, the process was actually The ultimate in bureaucratic inflation a competitive and often disorganized occurred, however, when, in 2015, “BRI was bottom-up affair. After Xi gave his Silk opened up to every country on Earth. There Road speeches in 2013, bureaucrats tried was no longer one belt and one road, but to outdo each other in sycophantic praise rather three land routes (to Europe via Central of him even as they launched a battle of Asia/Russia; to the Middle East via Central resources for their local governments, SOEs, Asia; and to India via Southeast Asia); two and ministries. Jones and Zeng provide a maritime routes (to Europe via the Indian snapshot of this process: Ocean, and to the South Pacific via the South China Sea); and six ‘corridors’ (the [T]hese politico-economic actors lobbied New Eurasian Land Bridge, China-Mongolia- furiously to influence the translation Russia, China-Indochina, China-Central of Xi’s slogans into concrete policy, Asia-West Asia, China-Pakistan and

57 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? BCIM).”137 Even some government officials port construction activities and military and intellectuals saw this as a bit too expansion in the Andaman Sea-Indian much, with one influential scholar, Xue Li, Ocean-Persian Gulf regions, might be foci of decrying the expansion of the BRI’s mandate legitimate concern among peoples in these to the whole world, arguing, “If you put it areas. However, some synergies are not at all everywhere, it becomes nothing.”138 evident and appear to exist more in the mind of the analyst than in the minds in Beijing. Not only does BRI threaten to become For instance, Thomas Cavanna writes: meaningless. It’s become very costly. The nascent Polar Silk Road and For instance, the BRI’s vision of Eurasian the combination of infrastructure “connectivity” has resulted in an explosion investments in continental Eurasia, of railway traffic from China to Europe the Suez Canal, and European port as local governments maneuvered to get terminals might propel China’s themselves on as railway freight stations commercial penetration of wealthy to gain visibility to the party leadership northwestern European economies. and thus access subsidies provided Likewise, a growing naval presence, new under BRI. This uncontrolled competition land corridors through Pakistan and has resulted in virtually empty freight Myanmar, and a rising influence in island trains running hundreds of thousands of states like Sri Lanka and the Maldives kilometers across the vast Eurasian land could turn Beijing into a “resident mass, with one particularly scandalous case power” in the Indian Ocean region. involving transporting 40 empty containers Admittedly, none of these outcomes and just one full container all the way to is predetermined. But they seem Europe.139 One commentary noted that reasonably plausible….141 the China-Europe railway “confirms what some observers have suspected all along: that China’s central government lacks the Not Helpless Pawns ability to keep the BRI strategically tight and coordinated. Sub-national stakeholders, In assessing the impacts of the BRI, it must as they do in other policy areas, have the be pointed out that participating countries incentives to bend the initiative to their own are not helpless pawns, as those promoting narrowly defined interests and in the process the grand design theory would like to undermine the overarching strategy, if such a portray them, though there are, of course, strategy indeed exists at all.”140 some who would find it harder to stand up to Beijing. For instance, within weeks Some of the more sophisticated exponents of each other in 2017, citing concerns of the BRI as Grand Strategy thesis concede about their national interests, Pakistan that “the initiative’s ambiguous and and Nepal cancelled multibillion dollar big disaggregated aspects have attracted valid dam projects that were part of the BRI, as criticism,” but they contend that “over time pointed out earlier. Pakistan objected to synergies may emerge between its various conditions that would have given China dimensions, its regional manifestations, ownership of the Diamer-Bhasha dam in and the other instruments of Beijing’s grand return for assuming costs of operation and strategy.” Some potential synergies, like maintenance and a pledge to build another

58 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? dam.142 In Nepal, the deal to build a dam its state enterprises, which creates problems between a previous governing coalition and for their projects and for China once local the China Gezhouba Group Corporation was power changes hands. reversed owing to the lack of competitive bidding during the old regime, according to the new government.143 Pakistan is a close “Debt Trap Diplomacy”? ally of China while Nepal borders China, but, as in the case of the suspension of the One of the accusations against Beijing is Myitsone Dam by Myanmar, both countries that it is engaged in “debt trap” diplomacy. cancelled the deals with no apparent fear As laid out by the White House Office on of Chinese retaliation, something that Trade and Manufacturing Policy, “China would be inconceivable if it were western uses a predatory “debt trap” model of companies that were involved. economic development and finance that proffers substantial financing to developing The list of governments showing their countries in exchange for an encumbrance independence of Beijing goes on: Prime on their natural resources and access Minister Mohammed Mahathir threatened to markets. These resources range to cancel the corruption-ridden East Coast from bauxite, copper, and nickel to rarer Rail Link project with a Chinese corporation commodities such as beryllium, titanium, made by the previous government, then and rare earth minerals.”146 Moreover, successfully brought down the cost of China then uses indebtedness to get the project from $16 billion to $11 billion countries to yield territory that is used in renegotiations.144 In the Maldives, the for strategic purposes, that is to project electoral defeat of a pro-China president in Chinese military power. The case cited here favor of the more critical Ibrahim Mohamed is that of the Hambantota Port, which it Solih has resulted in the renegotiation of acquired from Sri Lanka (with a $1.12 billion BRI-related debt, while in Sierra Leone the investment for a 85 per cent equity share) cancellation of a planned Chinese-funded on a 99-year lease because the government airport in the capital, Freetown, marked the had a difficult time servicing its debt on a first termination of a BRI project in Africa.145 Chinese loan for the project. What these examples show is that Beijing is not some all-powerful force that dictates The problem with this claim is that from a the terms of participation in the BRI to review of more than 1,000 Chinese loans developing countries but a distant center totaling more than $143 billion between that is enmeshed in local elite struggles with 2000 and 2017, tracked by the authoritative

ONE OF THE ACCUSATIONS AGAINST BEIJING IS THAT IT IS ENGAGED IN “DEBT TRAP DIPLOMACY.” THE FACTS DO NOT BEAR THIS OUT.

59 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? The money-losing Hambantota Port in Sri Lanka that was leased to China in exchange for a grant to cover the Sri Lankan government’s debt to Beijing. Who got the better deal–Sri Lanka or China?–is still the subject of scholarly dispute. Courtesy of Dinesh De Alwis via Wikimedia Commons.

China-Africa Research Initiative (CARI) at Hambantota, was the prime mover. Seeking Johns Hopkins University, and more than to solidify his hold on his constituency, he $140 billion in Chinese loans to Latin America resurrected an old plan, and convinced China and the Caribbean since 2005 by the equally to finance it and to fast-track its lending. prominent Global Development Policy Center When the port began operations, however, of Boston University, “the idea that the Chinese revenue intake did not match the original government is doling out debt strategically, for grandiose projections, saddling Sri Lanka its benefit, isn’t supported by the facts,” says with a debt servicing problem. Instead of CARI director Deborah Brautigam.147 a renegotiation of the terms of repayment, Sri Lanka and China agreed to the lease When it comes to Hambantota itself, arrangement, which, on superficial view, a detailed analysis by Jones based on benefited China but actually saddled a Chinese interviews with people intimate with the SOE with managing an unprofitable operation. details of the deal lends more credibility In his detailed account, Jones claims: to the counterargument that the outcome resulted in China’s trying to find a solution As a senior researcher in a think tank to a deal that was badly conceived from the linked to China’s State Council, familiar beginning, and one that was, in fact, more with the project, notes…Chinese unfavorable to it than to the host country.148 involvement was commercial: “the Chinese firms and banks expected a good In this telling, the Sri Lankan president, outcome…the port would make a profit Mahinda Rajapaksa, who was a native of and [the Sri Lankan government] could

60 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? repay the debt” (Interviewee E06 2018). diplomacy,’” Jones concludes, “this is a case In practice, however, the port created study of Chinese ineptitude, with an attempt vast surplus capacity, leading to heavy to export surplus capacity and capital losses: in 2016, the port’s revenues creating a ‘debt trap’ for the Chinese state.152 were just US$11.8m, versus operating expenses of US$10m. Without the profits The Rhodium Group also looked at charges needed to repay its loans, Colombo of Chinese seizure and found that “actual had to seek debt relief from China. In asset seizures are a very rare occurrence. July 2017, in exchange for US$1.1bn to Apart from Sri Lanka, the only other example service its debts to EXIM Bank, Colombo we could find of an outright asset seizure transferred a 70 percent stake in the port was in Tajikistan, where the government to a different SOE, China Merchants Port reportedly ceded 1,158 square km of land Holdings (CMPH), under a 99-year lease, to China in 2011. However, the limited along with 1,235 acres of land.149 information available, and the opacity of the process makes it difficult to determine In short, the reality was that “far from a whether this specific land transfer case was realization of China’s cunning plans,” the in exchange for Chinese debt forgiveness, solution actually reversed China’s recently or (as some observers argue) part of a adopted policy to relieve the problems of historical dispute settlement between the its indebted SOEs by shifting the burden of two countries.”153 Other investigators found repaying loans to China’s banks from the that similarly unfounded were reports that in banks to the recipient governments. return for debt relief, China was taking over Zambia’s electricity grid, or that in exchange As the State Council researcher states, for rebuilding Mogadishu’s seaport it “the debt crisis for other countries is an was getting “exclusive fishing rights” off asset crisis for Chinese banks”. CMPH– Somalia’s coast.154 ultimately backed by state-owned banks– has acquired a “white elephant project” After sifting through available records, one that may never recoup its US$1.1bn research agency concluded that “despite outlay. CMPH is left trying to turn the China’s size and growing international port’s fortunes around to recoup some of economic clout, its leverage in some of these the Chinese state’s financial losses; “that cases remains quite limited, even in disputes for China is a failure, not successful… This with much smaller countries.”155 behaviour is a trap for Chinese firms”, rather than the Sri Lankan government (Interviewee E06 2018).150 Mismatch between Ambitions and Resources Developments also contradicted the claim that China plotted to seize Hambantota Even if one were to grant that global to use as a naval base since the lease hegemony rather than a desperate effort to agreement specifically prohibited this, and externalize China’s surplus capacity is the in July 2018, the Sri Lankan navy’s southern main goal of BRI, one must ask where command was instead relocated to the China has the resources to sustain its port.151 “Far from a case of skillful ‘debt trap ambitious reach.

61 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Some of those who see BRI as a grand pointed out, “Like those from Western-backed plan appear to think that Beijing is an development banks in earlier years, Chinese inexhaustible piggy bank. The reality, loans now face default by countries that have however, is that China’s growth is slowing long been branded “serial defaulters.” China down, the export markets from which has provided massive loans to Pakistan, Sri it derived so much of the profits that it Lanka and Venezuela, and it is not clear the channeled to the global expansion of its SOEs Chinese will be paid back in full.”156 are stagnant, and the severely indebted SOEs that are also key actors in BRI cannot be There is, in fact, some indication that Beijing is maintained indefinitely on life support on the now having second thoughts along this line: In backs of the ill-rewarded savings of China’s 2017 and 2018, Chinese-led investment in BRI consumers that are funneled to them by state countries declined, meaning China could be banks. At some point, something has to give. tightening up its financing.157 As one analyst Indeed, instead of providing a way to make observes,“[C]ertainly, [the government has] indebted Chinese SOEs profitable, the BRI, reined in BRI in the last year or so and that as the Sri Lanka example shows, may merely trend of consolidation is likely to continue for compound China’s problems by taking on the period ahead.”158 In addition to financial customers that would be hard put to repay constraints, “on the domestic political front,” their loans, thus worsening the balance notes one report, “recent BRI loans have sheets of both the SOEs and the state banks triggered a ‘wave of grumbling in China’ from that are keeping them alive. As Gallagher has citizens who feel those funds would be better

President Xi Jinping leads China’s delegation in the 2015 Summit of the BRICS (Brazil, Russia, India, China, South Africa) grouping. Courtesy of www.kremlin.ru via Creative Commons.

62 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? spent at home in a country that still defines the middle class, which loses the perks itself as a developing economy.”159 of affordable overseas travel, shopping, and education. Similarly, market-oriented While there are those that acknowledge this reform is good for economic efficiency mismatch between ambition and resources but bad for the well-off, who benefit from in the face of China’s growing economic the privileged position the state occupies troubles, they say that China will somehow in the economy. Closing down redundant manage to muddle through. How exactly factories is an important step in dealing is not clear, however, given constraints that with industrial overcapacity, but it will have finally caught up with China’s ascent. result in unemployment and lost wages Here it is worth quoting at length one of the and will exacerbate inequality. And raising more thoughtful analysts of the current state taxes or stoking inflation will be useful of the Chinese economy, though one may not for reducing the corporate debt burden, agree with all its assertions. but it will eat into the ability of the public to consume, making people materially President Xi has labeled this current worse off when Xi’s promise—and that of period of slower growth “the New his “Chinese Dream,” where China will be Normal.” It’s a brilliant piece of restored to its rightful place in the global marketing, because there’s really nothing order—is that things will get better.160 normal about the situation. In reality, the Chinese economy is in a state of China has entered a time of economic flux. Most importantly, there are no good troubles. BRI is an attempt to solve the options left, and seemingly no political country’s economic contradictions by drive to endure the pain needed to set externalizing them. In fact, it may end up China on a newly invigorated, more exacerbating them. efficient path. The government is under immense pressure to maintain what it calls “medium fast growth.” Without it, Exporting Environmental Crisis China won’t move clear of the middle income trap, nor will it be able to realize This brings us to the biggest problem with the dream of national rejuvenation the BRI. before demography takes over and the aging population becomes a drain on The BRI, we have said, is not a grand plan the economy. But maintaining growth for domination but a desperate effort to at such elevated levels only exacerbates export Chinese industry’s surplus capacity. the problems of debt and waste. It may also be seen as a way to export China’s domestic political contradictions, by Furthermore, reform comes at a cost. providing an ostensibly “win-win” solution Beijing can’t wave a wand and wish the to the competing factions in the party-state debt away. It must decide how the burden leadership, the “maritime silk roads” for the of cleaning up the debt is going to be coastal export lobby and the “overland silk distributed—and those decisions come roads” for the inland provinces lobby and the with political ramifications. Devaluing infrastructure lobby, with all the competing the yuan is good for exports but bad for SOEs associated with these groupings.

63 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Thousands of people within Laos’ Nam Ou basin rely on farming, fishing, and riverweed collection. According to a basin-wide study, over 60% of fish species found in the Nam Ou will be unable to survive the BRI-financed seven dams and reservoirs being constructed in the area and will likely disappear altogether. Courtesy of International Rivers.

To these dubious exports must be added a Protection of China’s (MEP) Guidance on third, the export of China’s environmental Building the Green Belt and Road “are crisis brought about by the wasteful, non-binding and hardly implemented” in duplicative, and environmentally harmful BRI projects.161 activities of these same competing political and economic actors. Over 1,700 critical biodiversity spots and 265 threatened species will be adversely A great number of BRI projects are focused affected by the BRI, according to the World on dam-building and creating coal-fired Wildlife Federation, one of these being power plants, whose negative environmental Sumatra’s Batang Toru forest highlands, one impacts are already widely known. Some of Indonesia’s most biodiverse regions, where are most likely to be in extractive activities a $1.6 billion hydroelectric power plant poses like mining and oil, where China has financed a danger to the rare Tanapuli orangutan and ventures in Africa and Latin America. While the critically endangered Sumatran tiger and some advances have been made in terms of Sunda pangolin.162 having environmental impact assessments accompany dam and other infrastructure In the Philippines, the BRI-funded Kaliwa projects in China, environmental guidelines Dam in mountainous Eastern Luzon island such as the Ministry of Environmental is projected to displace some 20,000

64 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? indigenous peoples living in 230 hectares China, the Narmada Dam in India, and the of dipterocarp forests well as pose a threat Nam Theun 2 Dam in Laos. These are all to rare species of flora and fauna in the testaments to what Arundhati Roy has called area, “including several species of rattan, a modernity’s “disease of gigantism.”165 Others valuable palm used in the manufacture of have called this “neodevelopmentalism” while furniture and balls used in the kick volleyball yet others have called it “extractivism.” This game Sepak takraw,” as well the white- mindset cannot be said to be associated winged flying fox, slender-tailed cloud rat, with capitalism alone, since it has had civet cats, wild boar, Philippine eagle, and an appeal across ideological lines, with Philippine deer.163 Fordist capitalists, Soviet socialists, Chinese planners, and progressive Latin American Chinese officials boast of the “connectivity” governments such as the government of among countries that will be triggered by the former President Rafael Correa in Ecuador BRI. However, another kind of connectivity, and President Evo Morales in Bolivia. a more sinister one, might actually be one of the greater outcomes. According to one Chinese financing in Latin America, for study, BRI’s network of roads, railways, and instance, has supported many extractivist pipelines could introduce more than 800 alien ventures in oil, gas, and mining by invasive species–including 98 amphibians, progressive governments which promoted 177 reptiles, 391 birds and 150 mammals– these top down projects harmful to the into several countries along its many routes environment and indigenous peoples, with and developments, destabilizing their a perspective that “[s]ome damage to the ecosystems.164 environment and even some serious social impacts are accepted as the price to be paid The BRI is actually not so much a grand plan for the benefits that are obtained for the for domination but a grandiose anachronistic population as a whole.”166 transference to the 21st century of the technocratic capitalist, state socialist, and Technocratic and top-down in planning and developmentalist mindset that produced execution, driven by the needs of China’s the Hoover Dam in the US, the massive infrastructure construction complex, construction projects in Stalin’s Soviet Union marked by incoherence and duplication, and during the 1930’s, the Three Gorges Dam in insensitive to popular democratic control,

CHINESE OFFICIALS BOAST OF THE “CONNECTIVITY” AMONG COUNTRIES THAT WILL BE TRIGGERED BY THE BRI. HOWEVER, ANOTHER KIND OF CONNECTIVITY, A MORE SINISTER ONE, MIGHT ACTUALLY BE ONE OF THE GREATER OUTCOMES.

65 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? the BRI is the ultimate gigantistic program discussed Hanambatota deal with Sri Lanka and it is inviting a transborder ecological and is better interpreted as a case of Chinese social disaster–that is, if it does not first run ineptitude leading to a debt trap—for China. into a crisis triggered by fiscal and financial overreach. Even if one were to concede that BRI is a grand strategy, the big problem is where the trillions of dollars envisaged to underwrite Conclusion it will come from at a time when long postponed economic problems are catching Rather than a grand plan, the BRI is better up with China, including the massive seen as 1) a not too coherent package of indebtedness of the SOEs involved in the infrastructure building 2) clothed with high- infrastructure building initiatives. Designed flying visionary rhetoric, 3) that is meant to to relieve China’s problems by externalizing externalize China’s surplus capacity crisis and them, the BRI may well make them worse. 4) that is driven by competition and conflicts among local authorities, SOEs, and national The biggest problem with the BRI, however, ministries that spill over into the international is that with its externalization of industrial arena, and 5) that exports not only China’s surplus capacity, it is also exporting its surplus capacity but its factional political ecological crisis with its focus on dam contradictions and its environmental crisis. and infrastructure building and extractive ventures with few or no environmental In writing about the BRI, the target countries impact assessments. With its network of are often portrayed as passive aid and roads, railroads, and pipes, it is creating loan recipients. However, far from being routes for invasive species into local intimidated by China, neighboring countries environments. The BRI is at heart a 20th have not hesitated to cancel or renegotiate century top-down technocratic project deals that they felt were not in their interest. being transposed into the 21st century, And far from it being a case of cunning along with the attendant flaws that Chinese diplomacy to entrap Sri Lanka accompanied such projects in the US, in debt in order to seize a national asset Soviet Russia, India, China itself, and for strategic military purposes, the much Latin America.

66 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? VIII THE STRATEGIC DIMENSION

Germany is often described as a global of Vietnam to “teach Hanoi a lesson” for economic giant with a puny military capacity. overthrowing the Khmer Rouge, Beijing’s China is not in the same category, but its ally in Cambodia; in 1974, when It seized the global economic presence far outstrips its Paracel Islands in the South China Sea from military reach. China has a relatively small the now defunct state of South Vietnam; fleet of intercontinental ballistic missiles, a in 1969, when its troops engaged Soviet large army as befits a continental land power, troops in battle in a border war along the and a navy that is growing but is, for all Ussuri River; in 1962, when it was involved in intents and purposes, bottled up in the East large-scale skirmishes with India high in the and South China Seas. Himalayas to assert what Beijing felt was the rightful demarcation between India and China; and in 1950-53, during the Korean The Historical Record War, when it intervened massively to stop General Douglas MacArthur’s provocative As the eminent Singaporean academic push towards Manchuria to unilaterally Kishore Mahbubani has pointed out, In reunify Korea which China saw as an contrast to the other permanent members existential threat. of the United Nations Security—the United States, France, Russia, and Britain—Chinese There is simply no way this military record troops have not been engaged in an armed can be described as colonialist, imperialist, or conflict with or in a foreign country in the expansionist, though China’s recent actions last 30 years, the last one being a relatively in the South China Sea appear to deviate from brief naval battle with Vietnam in 1988.167 this established pattern, a point to which we Prior to that event, the only instances will return later. where the People’s Republic of China was engaged in a shooting war were in 1979, When it comes to Tibet, Xinjiang, Taiwan, when it carried out a punitive expedition and Hong Kong, the diplomatic posture across the border with the Socialist Republic of most governments, is that these areas

67 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? are historically part of China, so the PRC’s Nations’ Universal Declaration of Human actions with respect to them cannot be Rights and other international conventions placed in the same category as foreign to which it is a signatory. Second, much aggression or foreign intimidation. However, negative global reaction is understandable two considerations must be borne in since Beijing has often behaved towards mind. First, like all other countries, China these areas in a manner like that of a foreign is accountable to the world’s peoples for sovereign, with little sensitivity to the ways policies and practices that have a negative in which history, religion, and culture have impact on its people’s human rights, affected the disposition of the peoples of democratic rights, labor rights, minority rights these areas towards China. and other rights contained in the United

Propaganda poster by Xu Ling shows US General Douglas MacArthur butchering civilians. MacArthur led the US/UN forces that crossed from South Korea to North Korea in an effort to militarily unify Korea. Feeling an existential threat, China intervened massively at the invitation of the Democratic People’s Republic of Korea as MacArthur’s forces neared China’s border. From International Institute of Social History, call no BG E/27/169, reproduced in Robert Bickers, Out of China: How the Chinese Domination Ended the Era of Western Domination (London: Penguin, 2018).

68 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? would be “antithetical to U.S. values and Changing US Assessments interests.”168 In particular, it claims, “China of China’s Military Power seeks to displace the United States in the Indo-Pacific region, expand the reaches of To understand the evolution of China’s its state-driven economic model, and reorder military posture, it is important to refer to the region in its favor.”169 Declaring a turning the US defense establishment’s changing point in US policy towards Beijing, the NSS assessments of China’s relationship vis-à-vis claimed that, Washington. During the Reagan and Bush I years, China was seen as an ally against For decades, U.S. policy was rooted in the Soviet Union. With the collapse of the the belief that support for China’s rise Soviet Union, Beijing was formally named a and for its integration into the post- “strategic partner” for most of the Clinton war international order would liberalize years, where Washington was focused on China. Contrary to our hopes, China supporting the massive movement of US expanded its power at the expense of industrial facilities to China to take advantage the sovereignty of others. China gathers of its cheap labor, though it would raise its and exploits data on an unrivaled scale voice occasionally about Beijing’s human and spreads features of its authoritarian rights record, especially after the Tiananmen system, including corruption and the use Square Massacre. of surveillance. It is building the most capable and well-funded military in the With the arrival of the George W. Bush world, after our own. Its nuclear arsenal administration, China’s status was is growing and diversifying.170 transformed into that of a “strategic competitor.” However, owing to the priority While Trump has remained ambivalent on it accorded the “War on Terror” focused on Russia and flipflopped on North Korea, he the Middle East and the need to win China’s has been consistent in his antagonism support for it, the Bush II administration was towards China, though he seemed personally largely distracted from following up on this warm towards Xi in his first weeks in office. strategic redefinition of China. However, Moreover, unlike other administrations, which the succeeding administration of Barack delinked economic relations with China from Obama sought to refocus on China, heralding strategic relations, the Trump White House its much touted “Pivot to Asia,” whereby 60 has linked the two, saying the erosion of the per cent of the strength of the US Navy was country’s industrial base, which it attributes deployed to the Western Pacific. principally to Chinese “economic aggression,” is also compromising the US’s security: From the very first year of his administration, President Donald Trump has adopted a A healthy defense industrial base is bellicose posture toward China. In the a critical element of U.S. power and National Security Strategy (NSS) paper the National Security Innovation Base. released on December 2017, China was The ability of the military to surge in declared a “revisionist” power intent on response to an emergency depends replacing the US-centered world order on our Nation’s ability to produce with its own Sino-centric system, one that needed parts and systems, healthy and

69 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? secure supply chains, and a skilled U.S. onset of worsening relations by the end workforce. The erosion of American of the 2000’s. On the Chinese end, Hung manufacturing over the last two asserts, “The US-China alliance turned decades, however, has had a negative into US-China rivalry largely because of impact on these capabilities and a conjunction of factors: the 2008 global threatens to undermine the ability of U.S. financial crisis that gave some in Chinese manufacturers to meet national security elite the illusion of the coming collapse of requirements. Today, we rely on single the US and Europe and that China’s time to domestic sources for some products replace the US had come, and the economic and foreign supply chains for others, crisis of China starting circa 2012 that urged and we face the possibility of not being Beijing to resort to a more bellicose and able to produce specialized components nationalist policy to strengthen the regime’s for the military at home. As America’s legitimacy, which had previously been manufacturing base has weakened, grounded on the economic boom that was so too have critical work-force skills coming to an end.”173 ranging from industrial welding, to high-technology skills for cybersecurity It is important to trace the hardening of the and aerospace. Support for a vibrant US posture towards China over two decades domestic manufacturing sector, a solid (and China’s own contribution to it) to defense industrial base, and resilient understand why Beijing departed from the supply chains is a national priority.171 deliberately low-profile military stance of the Deng years. But things must be put in Trump’s trade war with China is not just a perspective: the $250 billion it spent on its trade war. It is part of an arsenal of tools military in 2018 was far outstripped by the designed to counter what the White House $649 billion military budget of the US, which perceives as China’s taking advantage accounted for 36 per cent of worldwide of the US’s economic and technological military spending.174 Moreover, there is resources for its own gain. Its strategic virtually no credible military expert that aim is to pressure Beijing to dismantle the would claim that China has fundamentally state’s role in the economy, which it sees as departed from its military posture during constituting an unfair advantage for China. the Deng period, that of the “strategic That economic warfare can slip into military defensive.” action is something that worries China, especially since ideologues closely tied to Current military doctrine has nuanced Trump see the threat coming from China in this posture to be one of “active defense,” undifferentiated political-military-economic a concept described as “strategically terms. Former White House chief strategist defensive but operationally offensive” and Steve Bannon, for instance, has seen China’s is said to be “rooted in a commitment not rise as “the greatest existential threat ever to initiate armed conflict, but to respond faced by the United States.”172 robustly if an adversary challenges China’s national unity, territorial sovereignty, or To be fair, China was not blameless in interests.”175 Or as one of the leading the ending of the informal economic and western analysts on the People’s political alliance with Washington and the Liberation Army puts it, “Strategically,

70 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? China is defensive—it’s not offensive, it’s by the United States’ deployment of a not an aggressor, it’s not a hegemon.But Terminal High Altitude Area Defense (THAAD) nevertheless, to achieve these defensive system in South Korea, which the US said goals, it will, at the operational and tactical was directed at North Korea but Beijing levels of warfare, use offensive operations interpreted as being also meant to “contain” and means.”176 China. In Beijing’s view, the US could become more reckless and be tempted to engage in a preemptive nuclear attack if it felt its missile The Nuclear Balance defense systems could nullify Beijing’s retaliatory strike capabilities.179 Chinese fears A country’s nuclear forces are one key have now been compounded by the US’s indicator of a military power’s imperial announced intention to deploy intermediate ambitions, not so much because of the range missiles in the Asia Pacific after it possibility of their actual use but because withdrew from the Intermediate Nuclear of their being used to intimidate other Forces Treaty with the Soviet Union in early countries to be compliant with its demands August 2019.180 Understandably, Beijing sees or wishes. Beijing has a relatively small this as significantly adding to the temptation nuclear force, being guided by a strategic of a US preemptive strike, and one that is doctrine of “No First Use” (NFU) focused particularly worrisome given skyrocketing on deterring a potential aggressor via the tensions with a US administration that maintenance of a second strike retaliatory apparently feels there is no “Chinese Wall” capacity. The US has vastly superior nuclear between a trade war and a shooting war. capabilities, and it has not adopted an NFU position. The PRC has only about 260 nuclear warheads while at the end of 2017, Conventional Warfare Capabilities the United States’ nuclear arsenal contained just under 1,400 deployed and approximately China’s conventional warfare arsenal has 4,000 stockpiled warheads.177 multiplied over the last decades, with the development of short range anti-ship and The PRC’s land-based offensive rockets anti-aircraft missiles and carrier based- as well as its sea-based missiles are aircraft like the J-15 aircraft designed to burdened with major technical problems. take off from carriers with a “ski-jump” Modernization of the People’s Liberation deck. Much of the focus of western analysts Army’s Rocket Force in both technical or has been on the People’s Liberation Army organizational terms has been limited in Navy (PLAN), now said to be the biggest in comparison to the United States’ constant Asia, deploying 300 warships, including four innovation of its nuclear forces, particularly ballistic missile submarines, four attack its missile defense systems. China’s nuclear- submarines, 50 conventionally powered armed submarines number only four, and submarines, and two aircraft carriers, only they are “much louder compared to similar one of which is currently operational.181 submarines.”178 Numbers are not, however, a good measure of real strength, for the quality of many of The PRC, in fact, feels that its long-standing China’s new weapons remains largely a deterrence posture has been undermined question mark, and where there is more

71 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? NUMBERS ARE NOT, HOWEVER, A GOOD MEASURE OF REAL STRENGTH, FOR THE QUALITY OF MANY OF CHINA’S NEW WEAPONS REMAINS LARGELY A QUESTION MARK, AND WHERE THERE IS MORE THAN SUPERFICIAL KNOWLEDGE, THE JUDGMENT IS OFTEN NEGATIVE, AS IN THE CASE OF ITS NOISY SUBMARINES OR ITS FUNCTIONALLY HANDICAPPED AIRCRAFT CARRIERS.

than superficial knowledge, the judgment is often negative, as in the case of its noisy When it comes to two key indicators of submarines or its functionally handicapped a military’s offensive capability, aircraft aircraft carriers.182 carriers and overseas bases, China is severely handicapped. The PLAN has only Moreover, a dictum of military assessments one operational carrier, a retrofitted former is that preparation for war is not the same as Soviet carrier, and its first domestically the capacity to wage war successfully, and built carrier is still undergoing trials. At one of the greatest drawbacks of the Chinese the moment, China has only one overseas military is its lack of actual military experience base, in Djibouti, and writing about its since the late seventies,183 whereas the US planned acquisition of a “string of pearls” has been constantly engaged in warfare over or island bases in the Indo-Pacific area the last seven decades.Ironically, this lack of is largely based, not on official defense experience is rooted in China’s longstanding policy, but on musings on China’s strategy posture of strategic defensive, which it has by US government agencies.184 The port shown no intention of abandoning, contrary to of Hambantota in Sri Lanka, which China what some western analysts suggest. leased for 99 years, is often routinely assumed to be one of these pearls, but There is much writing about the so-called as noted earlier, the lease agreement “blue-water” ambitions of the PLAN, that specifically prohibits its conversion into a is, its alleged push to compete for naval base and there is no evidence of China’s supremacy with the US. Much of this intention to use it strategically.185 True, the writing remains highly speculative, however, PLAN has taken more active measures to and reminds one of the spate of analyses protect its trade routes, like establishing the about the alleged Soviet push for maritime base of Djibouti and participating in anti- ascendancy in the 1970’s and early 1980’s, piracy activities off the Gulf of Aden. Since with the “founder” of the modern Chinese about 78 per cent of China’s oil imports Navy, the now fabled Admiral Liu Huaqing, transit through the Straits of Malacca from substituting for the then fabled Soviet farther west, it would be downright risky Admiral Gorshkov. 72 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? to rely solely on other navies, such as that firm that became infamous for its actions in of the US, to provide security for these Iraq. In 2014, Prince was recruited to head shipments. It is also true that PLAN has Frontier Services Group (FSG), a new Hong become more active diplomatically, with Kong-based logistic and risk management increased ship visits to ports throughout the firm with close ties to CITIC, China’s biggest world. But these actions can hardly be taken state-owned conglomerate.186 Its main as evidence of intent, effort, or capacity to business, according to Hung, “is to provide establish maritime dominance, at least in security services to Chinese companies in the short and medium term. Africa through a network of subcontractors on the ground. In late 2016, the company Indeed, there seems to be a growing gap announced that it was to adjust its between the PRC’s many interests and people corporate strategy to “better capitalize on to protect abroad and its capacity to defend the opportunities available from China’s them from terrorists, saboteurs, and hostage One Belt, One Road (OBOR) development takers. Unwilling to subcontract security to initiative.” It seems that instead of building the US and other foreign governments, China up the power projection capabilities of its has taken the unusual step of hiring foreign security agencies, China, at least in the short mercenaries like Erik Prince, the founder to medium term, is taking the route of having and former CEO of Blackwater, the security mercenaries take over a significant part of that role.

Shenyang J-15 jet fighter aircraft on deck of Chinese aircraft carrier Liaoning, one of only two People’s Liberation Army Navy (PLAN) carriers (one of which is still undergoing trials.) The US has 11 carrier task force groups centered around mainly Nimitz-class supercarriers. Photo courtesy of Cha Chunming. Public domain.

73 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? bases and thousands of military personnel, Beijing’s Strategic Dilemma the Philippines has US forces stationed in nominally Philippine bases, Taiwan remains The reason Beijing will not be able to depart a US protectorate, and the US Seventh Fleet, from a strategic defensiveposture and move which never demobilized after the Second to one of global military hegemony for a World War, roams the East and South China long, long time, if ever, is that it has its hands Seas with impunity. For all intents and full coping with its strategic dilemma in the purposes, the US intends a permanent South China Sea. China’s industrial power military presence in the first island chain lies along the eastern and southeastern since, as General Douglas MacArthur once coats bordering the East and South China put it, “The strategic boundaries of the US Sea, which is a relatively narrow stretch were no longer along the western shore of of water ringed on its western end by the North and South America; they lay along the so-called “First Island Chain” stretching eastern coast of the Asiatic continent.”187 from South Korea through Japan down to Okinawa, Taiwan, and the Philippines. This perspective is what has guided the South Korea and Japan host numerous US consistent US strategy of “forward defense,”

China’s Liaoning aircraft carrier. China has only two aircraft carriers, one of which is still undergoing trials. Courtesy of “Baycrest - Wikipedia user - CC-BY-SA-2.5 / Baycrest - 維基百科用戶 - CC-BY-SA-2.5” via Wikimedia Commons.

74 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? which is to push the active defense of the two Marine Expeditionary Forces and about US homeland farther westward several 86,000 personnel and 640 aircraft. The US thousand miles away from its western Pacific Air Forces comprise approximately political boundary, with the defensive goal 46,000 airmen and more than 420 aircraft. sliding into an offensive thrust of projecting The US Army Pacific has approximately US power onto the Asian land mass to 106,000 personnel from one corps and prevent the rise of a rival power that could two divisions, plus over 300 aircraft and threaten the United States. Preemptive five watercraft deployed from Japan and action has become central to the US posture, Korea to Alaska and Hawaii. Also included with the National Security Strategy Paper are more than 1,200 Special Operations of 2002 declaring that the US could engage personnel.189 in “anticipatory action to defend ourselves, even if uncertainty remains as to the time and The inescapable strategic dilemma of China place of the enemy’s attack.”188 is that large parts of this force lie right on its doorstep. And it constitutes not simply Backing the US forces in the East and South a potential threat but an active one. As China Sea and first island chain are massive one western analyst notes, “Washington’s forces deployed farther east, on the second persistent military encirclement of China, island chain stretching from Japan to the its debates about blockade scenarios, and Marianas and Micronesia, where deep waters its Air-Sea Battle Doctrine only aggravated provide an ideal environment for US ballistic [China’s] concerns.”190 missile submarines, and on and around the third island chain centered on Hawaii, where A strategy such as that of China during the headquarters of the US Indo-Pacific the Mao period, of having the capability Command is located. of retreating to China’s vast interior in the event of conflict, is no longer possible The largest of the United States’ Unified for today’s China since that would leave Commands, the Indo-Pacific Command exposed the heavily populated coastal urban has an awesome reach and a strike areas of Eastern and Southeastern China capability that has been displayed in war that undergird the country’s industrial and and aggressive “show the flag” actions technological power. As Samir Tata, an numerous times in the South and East China analyst appreciative of Beijing’s strategic Seas since the end of the Second World War, problem, puts it: including the dispatching of two aircraft carrier task forces to intimidate China, if As a land power, the Middle Kingdom not actually defend its Taiwanese ally, had does not have to worry about the unlikely Beijing taken more radical military action possibility of a conventional American during the Taiwan Straits Crisis in 1996. assault on the mainland via amphibious Currently, the Command deploys some landing by sea, parachuting troops by 337,000 military personnel. The US Pacific air, or an expeditionary force marching Fleet consists of approximately 200 ships, through a land invasion route. What it including five aircraft carrier strike groups, is vulnerable to is U.S. control of the nearly 1,100 aircraft, and more than 130,000 seas outside China’s 12-nautical mile sailors. US Marine Corps forces include maritime boundaries. From such an

75 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? over-the-horizon maritime vantage and, via land reclamation, adding some point, the U.S. Navy has the capability 3200 acres of artificial land to the seven to cripple Chinese infrastructure along formations it currently occupies. According the eastern seaboard by long range to the Pentagon, in early 2018, shelling, missiles, and unmanned aerial bombing.191 China continued its gradual deployment of military jamming equipment as “To address this weakness,” Tata writes, well as advanced anti-ship and anti- “in addition to modernizing and expanding aircraft missile systems to its Spratly its land-based anti-access/area denial Islands outposts. The missile systems capabilities, China is systematically are the most capable land-based establishing and demarcating a maritime weapons systems deployed by China equivalent of the Great Wall—a cordon in the disputed South China Sea. China sanitaire running from the South China Sea completed shore-based infrastructure through the East China Sea to the Yellow on four small outposts in the Spratly Sea.”192 The northern portion of this cordon Islands in early 2016. Facilities on would run from the Diaoyu Islands (Senkaku Johnson, Gaven, Hughes, and Cuarteron Islands, to the Japanese), which China claims Reefs include administrative buildings, but Japan occupies, to Taiwan, which China weapons stations, and sensor seeks to eventually integrate into its territory, emplacements.193 and the southern part from Taiwan to the Spratly Islands in the South China Sea, which China had also “completed more extensive China claims as its national territory. military infrastructure on three larger outposts in the Spratly Islands at Fiery Still stymied by Japan in the northern Cross, Subi, and Mischief Reefs. These portion, China has been more successful installations now include aviation facilities, in the south, unilaterally seizing maritime port facilities, fixed-weapons positions, formations claimed by the Philippines barracks, administration buildings, and communications facilities.”194

A STRATEGY SUCH AS THAT OF CHINA DURING THE MAO PERIOD, OF HAVING THE CAPABILITY OF RETREATING TO CHINA’S VAST INTERIOR IN THE EVENT OF CONFLICT, IS NO LONGER POSSIBLE FOR TODAY’S CHINA SINCE THAT WOULD LEAVE EXPOSED THE HEAVILY POPULATED COASTAL URBAN AREAS OF EASTERN AND SOUTHEASTERN CHINA THAT UNDERGIRD THE COUNTRY’S INDUSTRIAL AND TECHNOLOGICAL POWER.

76 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? MH-60R helicopter launches from the flight deck aboard the guided-missile destroyer USS Spruance, which is part of the US 3rd Fleet. US Navy photo.

areas within minutes from the second island The strategy guiding the formation of chain area with conventional weapons would this cordon sanitaire is apparently that remain formidable. Not surprisingly, the of “‘forward edge defense’ that would most recent elaboration of the Pentagon’s move potential conflicts far from China’s overall combat strategy, the Joint Concept territory.”195 This may have some success for Access and Maneuver in the Global since, as Tata claims, “China’s advantage Commons, is likely to be seen by Beijing as is that it does not have, nor does it seek, designed to overcome “an unprecedented the responsibility for controlling the global array of anti-access/area-denial (A2/AD) maritime commons, and, therefore, Beijing capabilities that threaten the U.S. and allied can concentrate substantially its entire naval model of power projection and maneuver”197 fleet on ensuring that it controls what it that constitutes the main component of considers to be territorial waters within the its defensive buildup in the East and South Middle Kingdom’s maritime Great Wall.”196 China Seas. But perhaps Beijing seeks not so much to gain substantial protection but But even if China were successful in nullifying to communicate to the US and any other US power within the East and South China adversary that its forces within the first island Seas, the US capacity to strike its coastal chain would have to be prepared to sustain heavy losses in any conflict. 77 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? accompanied by a change in China’s Conclusion military posture since the beginning of PRC. Strategic defense continues to be its China’s swift global economic expansion has fundamental stance. A major reason barring not been matched by growth in the reach of it from becoming a globally hegemonic its military forces. military power is its preoccupation with its massive strategic dilemma in the waters off Unlike the other big powers, China has not its eastern and southern coasts. Flanked engaged in a war outside its borders for by relatively narrow bodies of water, these over thirty years, and prior to that most of urban areas are directly threatened by the the conflicts it was involved in were border awesome combined land, air, and naval disputes, a large-scale defensive intervention, power of the United States right at its and a cross-border punitive expedition. In no doorstep. Some of these forces roam the way can this record be seen as expansionist. East and South China seas and are based on the offshore island chain stretching from Over the last two decades, China has South Korea to Japan proper to Okinawa significantly modernized its forces. This to the Philippines, with the rest deployed process cannot, however, be fully understood in the vast rear area of the second and without reference to the changing posture third island chains. China’s application of the US towards it, from being a de facto of strategic defense has been mainly to ally during the 1980’s to being a strategic seek to build a “great maritime wall” in the competitor from 2000 to 2016 to being waters and disputed maritime formations, in officially branded a “revisionist power” and support of its navy and land-based missiles “economic aggressor” and unofficially as and other weapons in its coastal areas. the “greatest existential threat to the United The aim of this “forward edge defense” States” by the Trump administration and its is to push US forces as far from Chinese key ideologues and policymakers. territory as possible on the pain of their suffering significant damage the event of Beijing has greatly increased its spending for a conflict if they loitered near the Chinese defense but the US continues to massively coast. Nevertheless, even if China does outspend it. gain dominance in the East and South China Seas, the threat from the massive firepower Military modernization has not been that the US can rain down on its coast within minutes is probably only slightly mitigated.

78 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? IX CHINA AND ITS NEIGHBORS IN THE SOUTH CHINA SEA

As has been shown in the preceding section, world, China might deploy the might of its China has very valid strategic defensive military and other resources in support of its concerns in the East and South China Seas. economic ambitions. Its way of addressing its strategic dilemma has, however, been problematic. More than other instances of questionable Chinese Valid Concerns, Wrong Approach behavior, it has been Beijing’s moves in the South China Sea that have triggered Even before the controversial submission of accusations that it is no better than the US its notorious “Nine Dash Line” claim to the and other western powers. They have created United Nations in 2009, China had engaged in the image of China as a Goliath bullying a unilateral takeover of a formation close to the small countries of the Association of and claimed by the Philippines in 1995. This Southeast Asian Nations (ASEAN), which, formation, Mischief Reef, was 130 nautical like Beijing, have territorial and resource miles off the Philippine island of Palawan and claims in the South China Sea: Vietnam, the about 660 nautical miles from China. Despite Philippines, Brunei, Malaysia, and Indonesia. protests from Manila, China reclaimed land, This is unfortunate since beyond the disputed built structures, and eventually put up anti- areas in the South China Sea and East China aircraft and other weapons systems. Sea, none of China’s neighbors fear territorial aggression by Beijing and have developed It was, however, a protest that China made in otherwise positive relations with it. 2009 against continental shelf submissions made by Malaysia and Vietnam that shocked Another disturbing aspect of China’s behavior the region. Aside from submitting the Nine in the South China Sea is that monopolizing Dash Line that graphically illustrated China’s the resources of the area appears to have claim to some 90 per cent of the South China become as important a motivation as Sea, Beijing also asserted in a note verbale strategic defense, leading some to worry that it had “indisputable sovereignty over that, in the future and in other parts of the the islands in the South China Sea and the

79 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Chinese and Vietnamese government vessels face off at sea in a dispute over oil exploration rights in May 2014. Courtesy of nbcnews.com via Creative Commons.

adjacent waters, and enjoys sovereign rights an arbitral tribunal at the Permanent Court and jurisdiction over the relevant waters as of Arbitration in the Hague, which issued well as the seabed and subsoil thereof.”198 a number of judgments in favor of the The Chinese claim was rightly interpreted Philippines in June 2016. The most important by China’s neighbors as disregarding their of these rejected China’s claim of historic rights to 200-mile Exclusive Economic Zones rights to almost all of the South China Sea (EEZs) under the United Nations Convention and its maritime formations. The arbitrators on the Law of the Sea that was signed and judged that “the Convention [UNCLOS] defines ratified by Beijing. This was confirmed by the scope of maritime entitlements in the a number of Chinese incursions into the South China Sea, which may not extend zones of neighboring countries to engage beyond the limits imposed therein,” meaning in oil and resource exploration and drilling that “China’s claims to historic rights, or other and harassment of their efforts to do so in sovereign rights or jurisdiction, with respect their own EEZs. Chinese fishing boats, many to…the ‘nine-dash line’ are contrary to the actually government vessels, were also said Convention and without lawful effect” if they to be entering their zones in large numbers, extend beyond the territorial sea, exclusive even as their own fishermen were harassed economic zone, and continental shelf which by Chinese maritime patrol ships. the country is entitled to under UNCLOS.199

The next big escalation of China’s territorial China did not participate in the proceedings acquisition strategy occurred in 2013, when and has ignored the ruling, saying the tribunal it effectively seized Scarborough Shoal, just had no right to hear nor issue a judgment 150 nautical miles from the Philippines, after on the Philippine case against it. Despite a standoff involving Filipino and Chinese Philippine President Rodrigo Duterte’s government vessels. Filipino fishermen were decision not to press Beijing to accept the then banned from entering the shoal by the Philippines’ legal victory, tensions remain, Chinese ships. climbing a notch higher with the ramming and sinking of a Filipino fishing boat in June In response to Chinese violations of its 2019. Vietnam and China have also engaged maritime rights, the Philippine government in recent confrontations over fishing and oil brought a landmark case against China to exploration in disputed waters.

80 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? China’s decision to go the unilateral big settlement, using the Philippine-China power route was not inevitable. There have conflict as a starting point.201 been alternative ways to resolve both the territorial/resource issue and the strategic First, since strategic defense is a central question that could have resulted in a more motivation for China’s behavior, the Philippines positive outcome for China and its smaller and China can agree to have bilateral talks on neighbors than the current imbroglio, from how to bring down the tension between the which only the US has benefited, with the countries. The aim of the these talks will not main issue, its strategic encirclement of be to settle the territorial issue but to negotiate China, largely obscured. In this regard, in military de-escalation. One possible proposal an article that appeared in a recent issue could be a freeze in China’s base-building of Harper’s Magazine, the prominent activities in exchange for a freeze in the Singaporean analyst Kishore Mahbubani implementation of the latest military agreement regrets the loss of an opportunity to take an that the Philippines has with the United States, alternative path in 2015, and this was not on the Enhanced Defense Cooperation Agreement account of China’s intransigence: (EDCA), which allows the US to use Philippine bases for its military buildup in that country. A former US ambassador to China, J. Stapleton Roy, told me that in a joint Second, perhaps simultaneously with the press conference with President Obama Philippine-China bilateral talks, China should on September 25, 2015, Xi Jinping not take seriously ASEAN’s longstanding offer to only proposed an approach to the South hold multilateral talks on a code of conduct China Sea that included the endorsement to govern the maritime behavior of all parties of declarations supported by all ten with claims to the South China Sea that they members of the Association of Southeast agreed to back in 2002. Asian Nations, but, more significantly, added that China had no intention of Third, should these two confidence-building militarizing the Spratly Islands, where measures achieve some success, ASEAN it had engaged in massive reclamation and China could move on to negotiations work on the reefs and shoals it occupied. to achieve significant demilitarization and Yet the Obama Administration made denuclearization of the South China Sea, with no effort to pursue China’s reasonable the goal of coming up with a multilateral treaty proposal. Instead, the US Navy stepped up that would be binding on all parties, including its patrols. In response, China increased third parties like the United States. the pace of its construction of defensive installations on the islands.200 Such an agreement would, of course, necessitate abandoning EDCA on the part of the Philippines and dismantling of military In Search of an Alternative structures in the South China Sea on the part of China. This agreement would complement In an article written following the Hague two earlier ASEAN agreements—the agreement tribunal judgment and China’s rejection to make ASEAN a Zone of Peace, Freedom, of it in 2016, the author outlined one such and Neutrality (ZOPFAN) and the Southeast proposal for both a strategic and territorial Asia Nuclear Weapons Free Zone Agreement

81 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? (SEANWFZ). It could also be the forerunner of others? A non-unilateral resolution to the of an East Asia-wide collective security South China Sea conflict could be the starting treaty that would replace the dangerous and point of a different path. volatile balance of power politics that simply promotes an uncontrollable arms race. Conclusion Finally, ASEAN and China could begin the process of resolving their competing China has very valid strategic defensive claims on Exclusive Economic Zones concerns in the South China Sea. However, and continental shelves and discussing the road it has taken there to resolve its joint development of fisheries and other strategic dilemma has involved violations of resources. Given political sensitivities, these the rights of other countries bordering that might be de facto arrangements instead body of water. It has also given China the of full-blown treaties or agreements, and image of being a new Goliath that is intent would not necessitate the concerned parties on repeating the aggressive behavior of the formally abandoning their claims. western powers and thus no different from them. Also disturbing is the apparent Chinese This route would not be easy to take. But its aim of monopolizing the resources of the area, medium and long-term benefits for China leading to fears that in the future, in other would far outweigh what little benefits the parts of the world, China might deploy military unilateral course can reap for it and avoid its force and other resources in support of its heavy costs. Beijing would distance itself economic ambitions. from its image of intransigence, especially as it seeks to be respected as a global actor An alternative route is possible, one that is different in intent and methods from the a combination of bilateral and multilateral western powers. This route would also open dialogue that aims at providing a peaceful up a future of peace with its neighbors instead and equitable resolution of the territorial of one of endless tension. It would make it issues as well as a much more effective way increasingly difficult for the US to justify its to address Beijing’s strategic concerns about massive military presence in the western US power. This route could pave the way for Pacific by convincing other countries that a multilateral agreement to demilitarize and it is necessary in order to “balance” China. denuclearize the area. This path would lead It provides a way out of a very volatile and the region away from the current balance of destabilizing balance of power politics that power politics, which promotes rather than could promote rather than prevent large-scale restrains military competition and conflict, conflict, as it did in Europe in the years leading much like it did in Europe in the years leading up to the First World War. As has been pointed up to the First World War. out a number of times, a mere ship collision can quickly escalate into a major war. Beijing is at a crossroads in its rise as a significant global actor, and its way of dealing China is at a crossroads. Will it follow the with the South China Sea issue could be road taken by the western imperial powers the starting point of an approach to other or will it take a different route that does not countries that is different from the behavior of seek to promote its interests at the expense the western imperial powers.

82 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? X CONCLUSION: THE JURY IS STILL OUT

China’s emergence as a capitalist power, tariffs and the elimination to other barriers from one of the world’s poorest economies to to trade, promoting a wave of corporate- its second largest in just 40 years, is one of driven globalization of production and the most remarkable feats of modern history. markets. While the US and Europe employed That this process has been largely peaceful, intimidation of developing countries to pry without the massive forced rural dislocations, open their markets, it was not them but slavery, genocide, and plunder that marked China that became the ultimate beneficiary the rise of the European and American of this process. Indeed, China’s rise was capitalist economies is equally remarkable. hugely destabilizing economically, not for When Chinese leaders boast that their China, but mainly for the advanced capitalist economic emergence has been a “peaceful economies, which underwent a process of ascent,” it is not just rhetoric. deindustrialization and saw the wages of their working classes stagnate and their To a great extent, the conditions surrounding living standards erode. the peaceful rise were unique. Export- oriented production for the US and European As China’s economy expanded, so did its markets had been pioneered by Japan and demand for the raw materials and products the so-called “tiger economies.” It took place of developing countries, providing them under the political canopy of an informal with an alternative market to those in the US-China alliance against the Soviet Union. global North and sparking a rise in the price In the US and Europe, neoliberalism had of commodities. Likewise, Chinese capital, destroyed the Keynesian social contract with which sought to develop raw material workers, allowing transnational corporations sources as well as support infrastructural to relocate to cheap labor areas. Compared development in the host economies, provided with other societies, China had a massive an alternative to development finance supply of labor that seemed inexhaustible. from the western-dominated multilateral Neoliberal doctrine and institutions like the institutions which had insisted on neoliberal World Trade Organization brought about low conditionalities that had led to stagnation,

83 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? dislocation, and rising poverty and inequality will come from at a time when China’s throughout the 1980’s and 1990’s. Today, growth rate has slowed significantly , with infrastructure lending from the World export markets are stagnant, state Bank and other western sources at a low enterprises are in severe debt, and level, China is virtually the only viable source squeezing savings out of consumers to for infrastructural loans for many developing fund ambitious projects is an increasingly countries without invasive conditionalities. unviable and unpopular strategy.

As China has expanded its economic The biggest problem with the BRI, however, is relations with the global South, there have that it is a grandiose top-down technocratic been many complaints about its loans and project guided by obsolete 20th century projects benefiting repressive regimes, perspectives transposed to the 21st century, promoting environmental destruction, and which threatens to expose a large part of involving labor exploitation. The accusations the world to ecological crisis. This neo- parallel criticisms of the behavior of Chinese developmentalist “gigantistic” approach corporations and authorities within China has appeal across the ideological divide. itself. Many of these complaints are valid. Its negative impacts on the environment However, they must be considered with three and democracy should be regarded as of things borne in mind. One, that China’s going equal concern as the possibility of China out into the world has taken place only during reproducing the economic and military the last 25 years and it is still on a steep behavior of the capitalist powers. learning curve. Two, that the depredations of western capital and its agencies, both In terms of its military power, the People’s historically and today, have been overall far Republic of China has, for the most part, not worse. And three, that China’s trade and deployed force for economic intimidation investment relations have not been imposed or “gunboat diplomacy,” and while it has by force on developing economies, unlike not shunned military conflicts, these have, those of the West. Having said this, the for the most part, involved border disputes, behavior highlighted by these criticisms must with the one massive military intervention it be urgently addressed and rectified on pain of engaged in being a campaign to counteract their consolidating into hegemonic patterns a unilateral US effort in 1950-53 to reunify of behavior. a neighboring country, Korea, that posed an existential threat to it. Beijing’s Belt and Road Initiative (BRI) has elicited different reactions from around The PRC’s fundamental posture continues the world. On the one side are those to be that of the strategic defensive, though who see it as Xi Jinping’s bid for global it has engaged in military modernization hegemony. Others see it as a sign of that now makes its military budget the China’s accumulating economic problems, second largest in the world. The PRC’s a desperate effort to solve the problem of budget is nonetheless a far cry from the industrial overcapacity by externalizing it. size of the US military budget. No amount The second is the more likely explanation. of modernization, moreover, has resolved A fundamental problem faced by the trillion Beijing’s basic strategic dilemma, which is dollar enterprise is where the resources the exposure of its eastern and southern

84 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? coasts to massive destruction from US of its state enterprises, corporations, and nuclear and conventional forces in the event citizens and allow these negative practices of conflict. to congeal into structural patterns very similar to those of the western powers. It can The PRC’s controversial moves of unilaterally ignore the fears of many that its top-down taking over disputed maritime formations, neo-developmentalist infrastructure-led engaging in military build-ups, and program—the ambitious but incoherent disregarding the territorial and economic BRI—will have a massive negative ecological rights of other states in the South China Sea and social footprint on a vast swathe of must be seen in the context of an attempt to the globe. address this strategic dilemma by creating what some have called a “Great Maritime Wall” Or it can take these criticisms seriously and extending from the Diaoyu islands off Japan to work with other governments and citizens’ the Spratlys off the Philippines to counter US movements to strike out on a different and power ensconced in the so-called “First Island more benign path in its evolving relationship Chain” that runs from South Korea through with the global South. It is in the South Japan to the Philippines. Where China has China Sea conflict that this choice most gone wrong is that in order to address the acutely confronts China. How it resolves its threat posed by the US, it has engaged in differences with its smaller neighbors there unilateral measures rather than collective can provide a template for the way it meets negotiations and actions with its smaller the criticisms that have been levelled at it neighbors. It has also troubled many that elsewhere. China’s motives are not only strategic but also economic, that is, to monopolize the economic Will China go the way of the West? The jury resources of the area, evoking the use of state is still out on this question, but the window power for economic exploitation that has been of opportunity for China to take a different a central feature of western imperialism. path is closing fast. In this decision on where China will go, progressive individuals The result has been a terrible image of and organizations outside China have a role China as a Goliath and a windfall for the to play. Indeed, their contribution would be US, allowing the latter to promote the idea invaluable. It is important for them to make that its military is in East Asia to protect the their critical voices heard by the Chinese interests of the smaller countries in the area. government and people whenever they see Instead of demilitarization, the region is now Chinese government agencies, SOEs and witnessing a destabilizing balance of power private firms following in the footsteps of regime where a major war could result from western actors, or imposing a destabilizing as small an incident as a ship collision in the neo-developmentalist program like the South China Sea. BRI. In this regard, they might take a leaf out of the book of peasants, workers, and China has undergone a largely peaceful environmentalists, whose protests have process of economic expansion. It is, become common in China and served as a however, now at a crossroads after 25 years counterweight to the actions of local officials, of going out to the world. It can continue in many cases forcing them to retreat or to ignore complaints about the behavior change their behavior.

85 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? Criticism, however, is not enough. misreading of historical and contemporary International civil society actors can offer reality. Likewise, to retreat, as some do, constructive suggestions on how Chinese to the position that while it is currently not enterprises can change their behavior. hegemonic, China is destined to become “CSR” (corporate social responsibility) an imperial power in the long run simply is a much derided term owing to the because it is a capitalist country that is ways western corporations have avoided going to have the world’s biggest economy real change in their ways through in a few years’ time is to fall into the superficial behavior modification such as fallacy of predestination, much like greenwashing. Nevertheless, learning from Calvinists did. One may speak about these failures, progressives can come out tendencies, but there is no such thing as with stricter codes of conduct with which predetermination. Not just individuals but to engage all economic actors, including societies have agency. the Chinese government, Chinese SOEs and Chinese private enterprises. They That having been said, while it is not an can offer alternatives to the anachronistic imperial power in the image of the West, 20th century modernist monstrosity that is China’s global expansion poses its own the BRI. An approach that combines hard unique set of problems for the South, criticism with positive engagement might be problems that China needs to address and the best way that we can help China avoid rectify on pain of imposing irreparable harm. the path followed by the West. A major source of concern is its obsolete 20th century approach to development, In conclusion, one may not have much which is technocratic, resistant to affection for the People’s Republic of China, democratic control, and insensitive to but to say that it is an imperial power like ecological concerns. This approach is the United States, Britain, and a number of most fully in display in its ambitious—and other European countries would be a gross alarming—Belt and Road Initiative.

WALDEN BELLO is the co-chair of the Board of Focus on the Global South. He is also Adjunct Professor of Sociology at the State University of New York at Binghamton. He is the author or co-author of 25 books, the latest of which are Counterrevolution: The Global Rise of the Far Right (Nova Scotia and London: Fernwood and Practical Action, 2019) and Paper Dragons: China and the Next Crash (London: Zed, 2019). As a member of the Philippine House of Representatives, he authored a resolution renaming the South China Sea the West Philippine Sea, a recommendation that was adopted by the Philippine government.

86 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? ENDNOTES

1 Karl Polanyi, The Great Transformation (Boston: land is the linchpin of the local governments’ Beacon, 2001), p. 4. development model. It allows them to seize land 2 Giovanni Arrighi, Adam Smith in Beijing: Lineages needed for public works, to create the industrial of the Twenty First Century (London: Verso, 2007), parks they give away as subsidies to attract p. 25. investment, and to borrow from banks that are 3 Polanyi, p. 37. willing to accept land as collateral. But most 4 Ibid., p. 41 importantly, the governments need the land in order 5 Arrighi, p. 272. to sell it, thereby generating the funds that make 6 Ho-fung Hung, The China Boom (New York: everything possible.” Dinny McMahon, China’s Columbia University Press, 2017), p. 8. Great Wall of Debt (London: Little, Brown, 2018), 7 Cathal Nolan, The Allure of Battle: A History of How pp. 76-77. Wars Have been Won and Lost (Oxford: Oxford 12 As Deng Xiaoping summed up China’s economic University Press, 2017), p. 79. development strategy in 1984, “Proceeding from 8 Ibid., pp. 79-80. the realities in China, we must first of all solve 9 Hung, p. 9 the problem of the countryside. Eighty per cent 10 Chinese authorities said that a central aim of of the population lives in rural areas, and China’s the Three Gorges Dam was to prevent or control stability depends on the stability of those areas. periodic floods that were harmful to millions of No matter how successful our work is in the cities, small farms in the areas bordering the Yangtze, it won’t mean much without a stable base in the their argument being that relocation with countryside. We therefore began by invigorating compensation of some farmers was necessary for the economy and adopting an open policy there, the greater good. so as to bring the initiative of 80 per cent of the 11 A good analysis of this process is provided by population into full play. We adopted this policy Dinny McMahon: “Chinese farmers have a tenuous at the end of 1978, and after a few years it has claim over the land they cultivate. All rural land produced the desired results. Now the recent belongs to the village collective. Farmers get to Second Session of the Sixth National People’s use it under thirty-year leases that are designed to Congress has decided to shift the focus of reform prevent avaricious village chieftains from arbitrarily from the countryside to the cities. The urban distributing land in favor of their own family or reform will include not only industry and commerce friends. However, leases offer no protection but science and technology, education and all against government officials the next level up, other fields of endeavour as well. In short, we shall who have the authority to acquire village land and continue the reform at home and open still wider to rezone it. Local governments are supposed to the outside world.” Deng Xiaoping, “Build Socialism do so only if it’s in the public interest, but the law with Chinese Characteristics,” June 30, 1984, doesn’t define that term, and consequently the http://academics.wellesley.edu/Polisci/wj/China/ public interest has been interpreted so broadly as Deng/Building.htm, accessed Aug 24, 2016. to encompass ornamental lakes, golf courses, and 13 Arthur Kroeber, China’s Economy (New York: Oxford amusement parks…The authority to redistribute University Press, 2016), pp. 32-33

87 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? 14 Ibid., pp. 52-53. effect being potential inflation, if the increase in 15 Ibid., p. 53. money leads to spending that outstrips the supply 16 Ibid. of whatever that money is being spent on. And 17 Ibid., pp. 53-54. A significant part of foreign credit creation can be used to produce real wealth investment came from Asia--from Japan, Korea, (like infrastructure). The collective benefits, in and from overseas Chinese interests in Taiwan, terms of the stimulation of economic activity or Singapore, and other Southeast Asian countries. other effects such as better health conditions that 18 Ho Fung Hung, personal communication, Aug 30, cut down on working days lost owing to sickness, 2019. far outstrip the value of the repayment of individual 19 See Fatoumata Jawara and Aileen Kwa, Behind the debt–like, for instance, the health benefits of a Scenes at the WTO (London: Zed, 2004). solar farm displacing a coal plant. Peter Beattie, 20 David H. Autor, David Dorn, Gordon H. Hanson, personal communication, Aug 19, 2019. “The China Shock: Learning from Labor Market 43 See, among others, “How China’s Going to Try to Adjustment to Large Changes in Trade,” National Control its Massive Housing Bubble,” Bloomberg Bureau of Economic Research Working Paper, News, Nov. 28, 2017, https://www.bloomberg. No. 21906, https://www.nber.org/papers/w21906, com/news/articles/2017-11-27/china-s-war-on- accessed July 11, 2019. bubbles-means-homes-sales-set-to-fall-in-2018, 21 Eduardo Porter, “Ross Perot’s Warning of a ‘Giant accessed July 30, 2018. See also Keith Bradsher, Sucking Sound’ on Nafta Echoes Today” New “China’s Housing Market is Like a Casino. Can a York Times, July 9, 2019, https://www.nytimes. Property Tax Tame It?,” New York Times, Jan. 22, com/2019/07/09/business/economy/ross-perot- 2018, https://www.nytimes.com/2018/01/22/ nafta-trade.html, accessed July 11, 2019. business/china-housing-property-tax.html, 22 Hung, p. 55. accessed July 30, 2018. 23 Roselyn Hsueh, China’s Regulatory State: A 44 Andrew Sheng and Ng Chow Soon, Shadow New Strategy for Globalization (Ithaca: Cornell Banking in China (Chichester: John Wiley, 2016), University Press, 2011), pp. 3-4. p.151. 24 Ibid. 45 Xian Songzun, quoted in McMahon, p. 131. 25 David Harvey, A Brief History of Neoliberalism 46 Wu Jinglian, quoted Anthony Kuhn, “Chinese (Oxford: Oxford University Press, 2007). Markets ‘Worse than a Casino’,” Los Angeles 26 Kroeber, p. 216. Times, March 29, 2001, http://articles.latimes. 27 Ibid., p. 43. com/2001/mar/29/business/fi-44137, accessed 28 Ibid., p. 132. July 30, 2018. 29 Hung, pp. 69-70. 47 “China’s stock market value exceeds 10 trillion 30 “The Global Centre,” The Economist, Feb 23, 2019, for the first time,” Bloomberg News, June 15, p. 42. 2015, https://www.bloomberg.com/news/ 31 Ibid. articles/2015-06-14/china-s-stock-market-value- 32 Hung, p. 57. exceeds-10-trillion-for-first-time, accessed June 33 Kroeber, p. 111. 25, 2017. 34 Ibid., p. 99. 48 Sidney Leng, “Firms Sucked into Black Hole of 35 Shantong Li and Zhaoyuan Xu, The Trend of Shadowy Debt,” South China Morning Post, July 18, Regional Income Disparity in the People’s Republic 2018. of China (Tokyo: Asian Development Bank Institute, 49 Sheng and Soon, p. xxiv. 2008), p. 16. 50 Ibid., p. xxix. 36 Nathaniel Taplin, “Chinese Overcapacity Returns 51 The massive mountain of nonperforming loans is to Haunt Global Industry,” Wall Street Journal, less likely to be the cause of a financial crisis since Jan 10, 2019, https://www.wsj.com/articles/ the state banks can simply keep them in the SOEs’ chinese-overcapacity-returns-to-haunt-global- accounts as performing loans indefinitely or simply industry-11547118946, accessed July 17, 2019. write them off. 37 Hung, p. 155. 52 Elizabeth Economy, The Third Revolution: Xi 38 Ibid. Jinping and the Chinese State (New York: Oxford 39 Dinny McMahon, China’s Great Wall of Debt University Press, 2018), p. 155. (London: Little, Brown, 2018), p. 43. 53 Ibid., p. 158. 40 Ibid. 54 Ibid., p. 159. 41 Ibid., p. 31. 55 Max Roser, “The global decline of extreme poverty 42 Ibid., pp. 32-33. More importantly, according to – was it only China?,” Our World in Data, Mar 7, one analyst, if state credit creation does not result 2017, https://ourworldindata.org/the-global- in the creation of assets that can earn enough decline-of-extreme-poverty-was-it-only-china, revenue to pay off the corresponding debt, it does accessed Sept 2, 2019. not necessarily follow that there is a sacrosanct 56 Kroeber, p. 197. debt that must be repaid now or in the future. The 57 Ibid. government can simply write off the debt–the 58 Ibid.

88 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? 59 Kroeber, p. 33. 84 Hung, p. 73. 60 McMahon, p. 76. 85 Toh Han Shih, Is China an Empire? (Singapore: 61 Amy Qin, “A Prosperous China Says ‘Men World Scientific Publishing Co., 2017), p. 42. Preferred,’ and Women Lose,” New York Times, July 86 “Latin America’s Agricultural Exports to China,” The 16, 2019, https://www.nytimes.com/2019/07/16/ Dialogue, Jul 29, 2011, https://www.thedialogue. world/asia/china-women-discrimination.html?ac org/blogs/2011/07/chew-on-this-latin-americas- tion=click&module=Top+Stories&pgtype=Homepa agricultural-exports-to-china/. ge&fbclid=IwAR2IhMvimKhEvkwuLzMkaeXojfBW5 87 Importing and Exporting in Latin America’s Biggest oQEHrvlnWk4mJT-fQ6PHBn7cgSXVaU, accessed Economies, Bizlatin Hub, April 18, 2019, https:// July19, 2019. www.bizlatinhub.com/importing-exporting-latin- 62 Ibid. americas-biggest-economies/. 63 Ibid. 88 Toh, p. 189. 64 Ibid. 89 Ibid. 65 Ibid. 90 “Goods trade up 10.5% amid large deficit with top 66 Ibid. partner China; electronics still top export, Business 67 Shalmali Guttal, personal communication, Aug 25, World, May 6, 2019, https://www.bworldonline. 2019. com/goods-trade-up-10-5-amid-large-deficit- 68 Wu Qiang, “What Do Lu Yuyu’s Statistics of with-top-partner-china-electronics-still-top- Protest Tell Us About the Chinese Society Today?,” export/, accessed July 21, 2019. China Change, July 6, 2016, https://chinachange. 91 Hung, p. 80. org/2016/07/06/the-man-who-keeps-tally-of- 92 Quoted in Toh, p. 42. Arguably this understates protests-in-china/, accessed July 19, 2019. the case. African governments have been able to 69 “Why Protests Are So Common in China,” extract considerable royalties from commodity Economist, Oct. 4, 2018, https://www.economist. exports, trade commodities for infrastructure com/china/2018/10/04/why-protests-are-so- investments, etc. (Lee Jones, personal common-in-china, accessed July 19, 2019. communication, Aug 19, 2019). 70 Terry Shelton and Jason Fang, “China’s economic 93 Kevin Gallagher, China’s Role As The World’s downturn leads to increased worker protests and Development Bank Cannot Be Ignored, National strikes across the country,” ABC News, Feb 16, Public Radio, Oct 11, 2018, https://www.npr. 2019, https://www.abc.net.au/news/2019-02- org/2018/10/11/646421776/opinion-chinas-role- 16/workers-protests-on-the-rise-as-chinas- as-the-world-s-development-bank-cannot-be- economy-slows/10793204?pfmredir=sm. ignored, accessed Aug 10, 2019. 71 Elaine Hui and Eli Friedman, “The Communist 94 Ibid. Party vs. China’s Labor Laws, Jacobin, Oct 2, 2018, 95 Toh, p. 45. https://www.jacobinmag.com/2018/10/china- 96 Ibid., pp. 189-190. communist-party-labor-law-jasic, accessed Aug 97 Walden Bello, Paradigm Trap: The Development 25, 2016. Establishment’s Embrace of Myanmar and How to 72 Ibid. Break Loose (Amsterdam: Transnational Institute, 73 Economy, p. 182. Moreover, not all the provinces 2018) p. 44. told to close down their coal plants have done 98 Ibid. so (Lee Jones, personal communication, Aug 19, 99 Lee Jones and Jinghan Zeng, “Understanding 2019). China’s ‘Belt and Road Initiative’: Beyond ‘Grand 74 Economy, p. 181. Strategy’ to a State Transformation Analysis,” 75 McMahon, p. 36. Third World Quarterly, 2019, pp. 11-12, https://doi. 76 Kroeber, p. 199. org/10.1080/01436597.2018.1559046, accessed 77 Ibid. July 23, 2019. 78 Hung, p. 72. 100 “More China loans eyed for PH infra projects,” 79 Eswar Prasad, Gaining Currency: The Rise of the Philippine Daily Inquirer, March 19, 2019, https:// Renminbi (Oxford: Oxford University, 2017), p. 67. business.inquirer.net/266994/more-china-loans- 80 Hongying Wang, “Global Imbalances and the Limits eyed-for-ph-infra-projects, accessed July 23, of the Exchange Rate Weapon,” in Eric Helleiner and 2019. Jonathan Kirshner, eds., The Great Wall of Money 101 Alvin Camba, interview in The Belt and Road (Ithaca: Cornell University Press, 2014), pp. Podcast, May 2, 2019, https://www.buzzsprout. 118-119. com/196316/1081901, accessed July 23, 2019. 81 Ibid. 102 Ibid. 82 Economy, p. 13. It must be pointed out, however, 103 Personal communication from Alvin Camba, Aug that some analysts do not see much evidence for 23, 2019. this assertion by Economy. 104 Julia Bader, “China, Autocratic Patron? An Empirical 83 Ibid. Again, we must point out that some experts Investigation of China as a Factor in Autocratic claim there is not much evidence to back this Survival,” International Studies Quarterly, Vol 59, No contention by Economy. 1 (March 2015), pp. 23-33.

89 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? 105 See Toh, pp. 76-77; Jones, p. 20. 16, 2017, https://www.scmp.com/news/china/ 106 See. for instance, Ngaire Woods, The Globalizers: diplomacy-defence/article/2120261/pakistan- The IMF, the World Bank, and Their Borrowers pulls-plug-dam-deal-over-chinas-too-strict, (Ithaca: Cornell University Press, 2006); accessed July 28, 2019; Nepal scraps $2.5 bln Independent Evaluation Group, World Bank hydropower plant deal with Chinese company,” Assistance to Agriculture in Sub-Saharan Africa Reuters, Nov 13, 2017, https://www.reuters.com/ (Washington, DC: World Bank, 2007); and Walden article/nepal-china-hydr, 2opower/nepal-scraps- Bello, Dark Victory: The United States, Structural 2-5-bln-hydropower-plant-deal-with-chinese- Adjustment, and Global Poverty (London: Pluto company-idUSL3N1NJ3HD, accessed July 28, Press, 1994). 2019. 107 Giles Mohan ad May Tan-Mullins, “The Geopolitics 119 Gallagher. of South-South Infrastructure Development: 120 “AidData study looks at impact of Chinese Chinese-financed Projects in the Global South,” infrastructure projects,” William and Mary, Sept 12, Urban Studies Journal, 2018. 2018, https://www.wm.edu/news/stories/2018/ 108 See, among others, Robin Broad, John Cavanagh, aiddata-study-looks-at-chinese-infrastructure- Catherine Coumans, and Rico La Vina, “Time for projects,-diffusion-of-economic-activity-in- Duterte to Shut Down This Mining Company,” developing-countries.php, accessed Aug 23, Rappler, Oct. 31, 2018, https://www.rappler.com/ 2018. The team was made up of analysts from thought-leaders/215664-analysis-time-for- the College of William and Mary, Leibniz University duterte-shut-down-mining-company-oceanagold, Hannover, Heidelberg University, Helmut Schmidt accessed Aug 8, 2019. Also, Robin Broad and University Hamburg and Harvard University. Julia Fischer-Mackey, “From Extractivism towards 121 Agatha Kratz, Allen Feng, and Logan Wright, Buen Vivir: Mining Policy as an Indicator of a “New Data on the ‘Debt Trap’ Question,” Rhodium New Development Paradigm Prioritizing the Group, April 29, 2019, https://rhg.com/research/ Environment,” Third World Quarterly, Vol 38, No 6 new-data-on-the-debt-trap-question/, accessed (2017), pp. 1327-1349. Aug 23, 2019. In both cases, however, the list of 109 Wifors, The Environmental Impacts of Novartis countries whose debts were cancelled were not along the Global Supply Chain (Basel: Wifors, July made known. 2018), p. 1. 122 Gallagher. 110 Hung Chen Teo et al., “Environmental Impacts of 123 Toh, p. 110. Infrastructure Development under the Belt and 124 Ho Fung Hung, “China and the Global South,” Road Initiative,” Environments, June 19, 2019, p. 13. in Thomas Fingar and Jean Oi, eds., Fateful 111 Ibid. Decisions: Choices that will Shape China’s Future 112 Mohan and Tan-Mullins, p. 15. Palo Alto: Stanford University Press, forthcoming, 113 Toh, p. 49. p. 31. As Hung explains, “In a bilateral loan 114 Camba. See also Christia Marie Ramos, “China to setting, China enjoys much greater autonomy Philippines: Ban All Online Gambling,” Philippine in deciding which countries and which projects Daily Inquirer, Aug 21, 2019, https://globalnation. to fund, and the terms of the loans are usually inquirer.net/179185/china-to-philippines-ban-all- determined by China’s negotiation with the online-gambling, accessed Aug 24, 2019. debtors, which are often much weaker than China. 115 Alvin Camba, “The Winners and Losers in Duterte’s The downside of bilateral lending is that China China Play,” South China Morning Post, Sept. is quite helpless if its debtors refuse to repay. If 30, 2018, https://www.scmp.com/week-asia/ loans are made through a China-led multilateral economics/article/2166070/winners-and-losers- lending institution like the AIIB, any debtor refusing dutertes-china-play, accessed July 23, 2019. It to repay will face collective pressure from all was reported by TV Patrol on Aug 30, 2019, that the stakeholders in the institution. Any country that Philippines has agreed not to grant new licenses defaults on a loan from the multilateral lending for online gambling but declined the Chinese institution will risk losing not only future credits government’s demand to ban it outright. from China, but also loans from all other countries 116 V.I. Lenin, Imperialism: The Highest Stage of involved in the institution.” Capitalism, https://www.marxists.org/archive/ 125 A. Bhattacharya, quoted in Jones & Zeng, p. 1, lenin/works/1916/imp-hsc/, accessed July 24, accessed July 23, 2019. 2019. 126 Jonathan Holslag, The Silkroad Trap: How China’s 117 It must be noted, however, that many in Myanmar Trade Ambitions Challenge Europe (Cambridge: feel that China manipulates its relations with Polity Press, 2019), pp. 2, 156, 157. ethnic armed groups along the border to intimidate 127 White House Office of Trade and Manufacturing the Myanmar government (Lee Jones, personal Policy, How China’s Economic Aggression communication, Aug 19, 2019). Threatens the Technologies and Intellectual 118 Liu Zhen, “Pakistan pulls plug on dam deal over Property of the United States and the World China’s ‘too strict’ conditions in latest blow to Belt (Washington: White House Office of Trade and and Road plans,” South China Morning Post, Nov Manufacturing Policy, June 2018), p. 23.

90 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? 128 Lee Jones, “The Political Economy of China’s 145 Ian Hutchinson, “Belt and Road in 2019: Belt and Road Initiative,” Paper presented at the Recalibration or Retrenchment?,” China fifth Australian International Political Economy Business Review, April 1 2019, https://www. Network Workshop, Perth, February 14-15, 2019, chinabusinessreview.com/belt-and-road-in-2019- and the British International Studies Association recalibration-or-retrenchment/, accessed Aug 25, Conference, London, June 12-14, 2019. 2019. 129 Jones and Zeng, p. 8. 146 White House Office of Trade and Manufacturing 130 Ren Xiao, “China as an institution-builder: the case Policy, p. 1. of the AIIB,” The Pacific Review, Vol 29, No 3 , 2016, 147 Deborah Brautigam, “Is China the World’s Loan p. 440. Shark?,” New York Times, April 26, 2019, https:// 131 Holslag, p. 151. www.nytimes.com/2019/04/26/opinion/china- 132 White House Office of Trade and Manufacturing belt-road-initiative.html, accessed Sept 5, 2019. Policy, p. 24. 148 Jones. 133 Jones and Zeng., p. 2. 149 Ibid., p. 13. 134 Ibid., p. 3. 150 Ibid. 135 Ibid. 151 Ibid. 136 Ibid., pp. 8-9. 152 Ibid., pp. 13-14. 137 Ibid., pp. 10-11. 153 Kratz, Feng, and Wright. 138 Quoted in Economy, p. 194. 154 Abdul Latif Dahir, “’The debt-trap’ narrative around 139 TJ Ma, “Empty Trains on the Modern Silk Road: Chinese loans shows Africa’s weak economic When Belt and Road Interests Don’t Align,” diplomacy,” Quartz Africa, https://qz.com/ Panda Paw Dragon Claw, Aug 23, 2019, https:// africa/1542644/china-debt-trap-talk-shows- pandapawdragonclaw.blog/2019/08/23/empty- africas-weak-economic-position/February 5, 2019. trains-on-the-modern-silk-road-when-belt-and- 155 Kratz, Feng, and Wright. road-interests-dont-align/, accessed Aug 26, 2019. 156 Gallagher. 140 Ibid. 157 “Belt and Road without China?, Yes, It’s Possible,” 141 Thomas P. Cavanna, “Unlocking the Gates of Bloomberg, Apr 3, 2019, https://economictimes. Eurasia: China’s Belt and Road Initiative and indiatimes.com/news/international/world-news/ Its Implications for U.S. Grand Strategy,” Texas belt-and-road-without-china-yes-its-possible/ National Security Review, Vol 2, No 3 (July 2019), articleshow/68699680.cms, accessed Aug 24, https://tnsr.org/2019/07/unlocking-the-gates-of- 2019. eurasia-chinas-belt-and-road-initiative-and-its- 158 Matthew Goodman, quoted in Hutchinson. implications-for-u-s-grand-strategy/, accessed 159 Ibid. Aug 9, 2019. 160 McMahon, pp. 211-212. 142 Liu Zhen. 161 Jason Thomas, “China’s BRI negatively impacting 143 “Nepal scraps $2.5 bln hydropower plant deal with the environment”, The ASEAN Post, Feb 19, 2019, Chinese company,” Reuters, Nov 13, 2017. https://theaseanpost.com/article/chinas-bri- 144 “Mahathir: Malaysia Saves Billions in Renegotiated negatively-impacting-environment, accessed Aug ECRL Deal with China,” Benar News, April 15, 25, 2019. 2019, https://www.benarnews.org/english/ 162 Ibid. news/malaysian/rail-deal-04152019164237. 163 David Green, “The Philippines’ China Dam html, accessed July 28, 2019. Alvin Camba, in Controversy,” The Diplomat, March 29, 2019, personal communication (Aug 23, 2019), also https://thediplomat.com/2019/03/the-philippines- informed the author that in the Philippines, the china-dam-controversy/, accessed Aug 25, 2019. Duterte administration and local business interests 164 Thomas. have objected to previously negotiated projects 165 Arundhati Roy, quoted in Maria-Sabina Alexandru, that were to be funded by China, resulting in their “Towards a Politics of the Small Things: Arundhati cancellation. See also “China’s Infrastructure Roy and the Decentralization of Authorship,” in Investments in the Philippines,” US-Philippine Kyriaki Hadjrafxendi and Polina Mackay, eds., Society, undated, https://www.usphsociety. Authorship in Context: From the Theoretical to the org/2018/08/02/chinas-infrastructure- Material (New York: Palgrave Macmillan, 2007), p. investments-in-the-philippines/, accessed Aug 173. 23, 2019. Camba’s research reported here showed 166 Alberto Acosta, “Extractivism and Neoextractivism: that “Of the $24 billion in pledges received by Two Sides of the Same Curse,” in Miriam Lang the Duterte administration in Beijing, $15 billion and Dunia Mokrani, eds, Beyond Development: were negotiated between private businesses that Alternative Visions from Latin America (Amsterdam have been modified or cancelled. Camba noted and Berlin: Rosa Luxemburg Foundation and that negotiations have stalled on some hard to Transnational Institute, 2013), p. 72. implement projects, including rail networks. There 167 Kishore Mahbubani, “What China Threat? How is more optimism over prospects for flood control, the United States and China can Avoid War,” roads, ports and airports that have wide benefits.” Harper’s Magazine, Feb 2019, p. https://harpers.

91 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? org/archive/2019/02/what-china-threat/, https:// may actually have contributed to making the PRC harpers.org/archive/2019/02/what-china-threat/, gun-shy since it ended in defeat at the hands of accessed July 30, 2019. seasoned Vietnamese troops. See ibid. 168 White House, National Security Strategy of the 184 Juli Macdonald, Energy Futures in Asia: Final United States of America (Washington, DC: White Report (McLean: Booz-Allen and Hamilton, 2004). House, Dec 2017), p. 25. 185 Jones, p. 16. 169 Ibid. 186 Hung, China and the Global South, pp. 32-33. 170 Ibid. 187 As summed up in “Conversation with General of 171 White House, pp.29-30. the Army MacArthur and George Kennan, 5 March 172 Quoted in Stephen Wertheim, “Is It Too Late to 1948—Top Secret,” in Containment: Documents on Stop a New Cold War With China?,” New York American Policy and Strategy, 1945-1950, edited by Times, June 8, 2019, https://www.nytimes. Thomas Etzold and John Lewis Gaddis (New York: com/2019/06/08/opinion/sunday/trump-china- Columbia University Press, 1978), p. 229. cold-war.html, accessed August 4, 2019. 188 U.S. National Security Strategy: Prevent Our 173 Ho Fung Hung, personal communication, Aug 30, Enemies From Threatening Us, Our Allies, and Our 2019. Friends with Weapons of Mass Destruction,” US 174 Matthew Schwartz, “Global Military Spending is Up, Department of State Archive, https://2001-2009. Driven by Two Top Spenders—the US and China,” state.gov/r/pa/ei/wh/15425.htm, accessed Aug 4, National Public Radio, April 29, 2019, https://www. 2019. npr.org/2019/04/29/718144787/global-military- 189 US Indo-Pacific Command, About US INDOPACOM, expenditures-up-driven-by-top-two-spenders-u- https://www.pacom.mil/About-USINDOPACOM/, s-and-china, accessed Aug 3, 2019. accessed Aug 4, 2019. 175 US Department of Defense, Annual Report to 190 Cavanna. Congress: Military and Security Developments 191 Samir Tata, “China’s Maritime Great Wall in the Involving the People’s Republic of China 2019 South and East China Seas,” The Diplomat, Jan 24, (Washington, DC: Department of Defense, 2019), p. 2017, https://thediplomat.com/2017/01/chinas- 27. maritime-great-wall-in-the-south-and-east-china- 176 Quoted in Kaiser Kuo, “Military Strategy and seas/, accessed Aug 4, 2019. Politics in the PRC: A Conversation with Taylor 192 Ibid. Fravel,” Sinica Podcast, July 3, 2019, https:// 193 US Department of Defense, p. 75. supchina.com/podcast/military-strategy-and- 194 Ibid. politics-in-the-prc-a-conversation-with-taylor- 195 Ibid. p. 16. fravel/, accessed Aug 23, 2019. 196 Tata. 177 Eric Gomez, “U.S. Missile Defense and the Future 197 Michael E. Hutchens et al., “Joint Concept for of Nuclear Stability with China,” Paper presented at Access and Maneuver in the Global Commons: the International Studies Association Conference, A New Joint Operational Concept,” Joint Force Toronto, March 2019, p. 20. Quarterly 84, National Defense University Press, 178 Ibid., p. 11. Jan 27, 2017, https://ndupress.ndu.edu/Media/ 179 Ibid., p. 1. News/Article/1038867/joint-concept-for-access- 180 Lolita Baldor, “US to soon put intermediate range and-maneuver-in-the-global-commons-a-new- missile in Asia,” Military Times, Aug 4, 2019, joint-operati/, accessed Aug 9, 2019. https://www.militarytimes.com/news/pentagon- 198 US Department of Defense, p. 7. congress/2019/08/04/esper-us-to-soon-put- 199 Arbitral tribunal ruling Asian Maritime intermediate-range-missile-in-asia/, accessed Aug Transparency Initiative, “Failing or Incomplete? 10, 2019. Grading the South China Sea Arbitration,” July 19, 181 US Department of Defense, p. 35. 2019, https://amti.csis.org/failing-or-incomplete- 182 Ibid., p. 37. grading-the-south-china-sea-arbitration/, 183 Timothy R. Heath, “China’s Military Has No Combat accessed Aug 6, 2019. Experience: Does It Matter?” The Rand Blog, https:// 200 Mahbubani. www.rand.org/blog/2018/11/chinas-military- 201 Walden Bello, “Duterte Is Right to End the has-no-combat-experience-does-it-matter.html, U.S.-Philippine Military Exercises,” New York accessed Aug 4, 2019. This article originally Times, Oct 16, 2016, https://www.nytimes. appeared in Foreign Policy on Nov 27, 2018. The com/roomfordebate/2016/10/18/can-the-us- last big conflict the Chinese engaged in, their philippine-alliance-survive-duterte/duterte-is- 1979 expedition to teach Vietnam a lesson for right-to-end-the-us-philippine-military-exercises, overthrowing their Khmer Rouge allies in Cambodia, accessed Aug 10, 2019.

92 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST? ACKNOWLEDGEMENTS

I am very grateful to Shalmali Guttal, Ho-Fung Antonio Tricarico, Dottie Guerrero, Chris Hung, Lee Jones, Alvin Camba, Peter Beattie, Vanslambrouk, Stephanie Olinga-Shannon, Dorothy Guerrero, Joseph Purugganan, Fona Dove, and Nick Buxton. Galileo de Guzman Castillo, and Ed Legaspi for providing very detailed substantive and All of these associates, colleagues, editorial suggestions and revisions. and friends are not, however, to be held responsible for any errors of fact or judgment The following colleagues generously shared that may appear in this study. For these, their ideas and research: Eric Gomez, May I assume sole responsibility. Tan-Mullins, Ren Xiao, Darren Lim, Thomas Cavanna, James Masterson, Thomas Moore, Thank you, too, to Alec Bamford for Alan Chiong, Stephen Noakes, and Paul Lenze. copyediting and proofreading assistance, and Amy Tejada for layout and artistic support. I would also like to thank the participants at the Transnational Institute’s workshop on Walden Bello China held in in Amsterdam in June 2019: Bangkok Pietje Vervest, Charles Santiago, Lee Jones, Sept 20, 2019

93 CHINA: AN IMPERIAL POWER IN THE IMAGE OF THE WEST?

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