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China's and US Diplomacy, Foreign Aid, Trade, and Investment in the Developing World

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China's and US Diplomacy, Foreign Aid, Trade, and Investment in the Developing World = 425&7.3,= 14'&1=3+1:*3(*a=-.3&8=&3)= __=.5142&(>`=47*.,3= .)`=!7&)*`=&3)= 3;*892*39=.3=9-*=*;*145.3,=$471)= -42&8= :2`= 447).3&947= 5*(.&1.89=.3= 8.&3= ++&.78= :,:89=+/`=,**2= 43,7*88.43&1= *8*&7(-=*7;.(*= 18/1**= <<<_(78_,4;= -.0,*= =*5479=+47=43,7*88 Prepared for Members and Committees of Congress 425&7.3,= 14'&1=3+1:*3(*= = :22&7>= This report compares the People’s Republic of China’s (PRC) and U.S. projections of global influence, with an emphasis on non-coercive means or “soft power,” and suggests ways to think about U.S. foreign policy options in light of China’s emergence. Part One discusses U.S. foreign policy interests, China’s rising influence, and its implications for the United States. Part Two compares the global public images of the two countries and describes PRC and U.S. uses of soft power tools, such as public diplomacy, state diplomacy, and foreign assistance. It also examines other forms of soft power such as military diplomacy, global trade and investment, and sovereign wealth funds. In Part Three, the report analyzes PRC and U.S. diplomatic and economic activities in five developing regions—Southeast Asia, Central Asia, Africa, the Middle East, and Latin America. China and the United States use tools of soft power in different ways and with varying effects. Since the mid-1990s, the PRC has adopted an increasingly active and pragmatic diplomatic approach around the world that emphasizes complementary economic interests. China’s influence and image have been bolstered through its increasingly open and sophisticated diplomatic corps as well as through prominent PRC-funded infrastructure, public works, and economic investment projects in many developing countries. Meanwhile, some surveys have indicated marked declines in the U.S. international public image since 2002. Some foreign observers have criticized U.S. state diplomacy as being neglectful of smaller countries or of countries and regional issues that are not related to the global war on terrorism. According to some experts, U.S. diplomatic and foreign aid efforts have been hampered by organizational restructuring, inadequate staffing levels, and foreign policies that remain unpopular abroad. Despite China’s growing influence, the United States retains significant strengths, including latent reserves of soft power, much of which lie beyond the scope of government. Furthermore, by some indicators, China’s soft power has experienced some recent setbacks, while the U.S. image abroad has shown signs of a possible renewal. The United States exceeds the People’s Republic of China (PRC) in global trade, although the PRC is catching up, and far surpasses China in GDP and foreign direct investment. It continues to be the dominant external political and military actor in the Middle East and political and economic influence in Latin America. The United States maintains formal alliances in Europe and Asia, and far outweighs the PRC in military spending and capabilities. The 110th Congress has held hearings and proposed measures that support U.S. public diplomacy, diplomatic efforts, and foreign aid. Relevant legislation includes the Implementing Recommendations of the 9/11 Commission Act of 2007 (P.L. 110-53) and the Public Diplomacy Resource Centers Act of 2007 (H.R. 2553). This report will not be updated. 43,7*88.43&1=*8*&7(-=*7;.(*= 425&7.3,= 14'&1=3+1:*3(*= = = 439*398= PART ONE: OVERVIEW ............................................................................................................... 1 Introduction ..................................................................................................................................... 1 Contrasting Diplomatic Styles .................................................................................................. 1 China’s Economic Attractiveness ....................................................................................... 1 PRC and U.S. Soft Power in Five Regions ............................................................................... 2 Diplomacy........................................................................................................................... 2 Foreign Assistance ..............................................................................................................3 A U.S. Resurgence?................................................................................................................... 4 Foreign Policy Interests and Implements of Power......................................................................... 5 The Post-Cold War Interlude.....................................................................................................6 The China Model?..................................................................................................................... 7 Implications for the United States........................................................................................... 10 Instruments of Hard and Soft Power....................................................................................... 13 Assessing China’s Soft Power....................................................................................................... 16 Limitations on Chinese Soft Power .................................................................................. 17 PART TWO: COMPARISONS OF U.S. AND PRC INSTRUMENTS OF HARD AND SOFT POWER ........................................................................................................................... 18 Diplomacy and Foreign Assistance ............................................................................................... 18 U.S. Public Diplomacy............................................................................................................ 19 Background....................................................................................................................... 19 U.S. Educational and Cultural Exchange Programs ......................................................... 20 Funding ............................................................................................................................. 20 PRC Confucius Institutes and Language Training .................................................................. 23 Foreign Students...................................................................................................................... 23 State Diplomacy ...................................................................................................................... 24 U.S. Foreign Aid ..................................................................................................................... 25 Background....................................................................................................................... 25 Funding ............................................................................................................................. 26 China’s Foreign Aid ................................................................................................................ 28 Global Public Perceptions ............................................................................................................. 30 PRC and U.S. Military Diplomacy................................................................................................ 30 Overview of Military Budgets ................................................................................................ 31 Military Training ..................................................................................................................... 32 Peacekeeping Operations ........................................................................................................ 35 International Trade Flows.............................................................................................................. 37 Overseas Direct Investment........................................................................................................... 50 China’s Sovereign Wealth Fund .................................................................................................... 63 China’s Reasons for Creating China Investment Corporation ................................................ 64 Will and Can China Use the CIC as an Instrument of Soft Power? ........................................ 65 CIC’s Unintended Soft Power Effects..................................................................................... 66 PART THREE: REGIONAL COMPARISONS ............................................................................ 67 Southeast Asia ............................................................................................................................... 67 Cultural and Educational Exchange Activities........................................................................ 70 43,7*88.43&1=*8*&7(-=*7;.(*= 425&7.3,= 14'&1=3+1:*3(*= = U.S. Programs ...................................................................................................................70 Foreign Students ............................................................................................................... 71 Diplomacy............................................................................................................................... 71 China’s Efforts to Boost Economic Ties with ASEAN..................................................... 72 U.S. Efforts to Bolster Trade with ASEAN .....................................................................
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