The Asian Voice

China is set to shape the international order: The Daily Star Columnist

A man waves the Chinese national flag as an amateur choir performs in a park in a residential neighbourhood in Beijing, China on Feb 28, 2017.
A man waves the Chinese national flag as an amateur choir performs in a park in a residential neighbourhood in Beijing, China on Feb 28, 2017. PHOTO: REUTERS

DHAKA (THE DAILY STAR/ASIA NEWS NETWORK) - Much of the world is beset by uncertainty. Regional conflicts and climate change threaten intensified population pressures and migration. Brexit and the polarisation of the United States under President Trump are echoed by rising nationalism and populism, notably in the European Union.

Global trade, financial flows and regulation are threatened by protectionism.

The international order established under United Nations and US leadership after World War II is being challenged. However, world economic growth continues, particularly in much of Asia; the information explosion and technological and scientific advances create new opportunities for human progress.

When Xi Jinping made the first ever visit by a Chinese President to the Davos conference and defended the causes of international order and free trade the world sighed with relief. China's three decades of phenomenal economic development, since Deng Xiaoping, set it on a new course of communist party controlled capitalism creating an economic giant, which in purchasing power parity terms is equal to the US and perhaps bigger than that of India, Japan and Germany combined.

This raises new questions: How does China see its new role in the world economy and order? Can it successfully manage its transition to somewhat slower growth and greater emphasis on services and domestic consumption? Does it wish to challenge the post-WWII international order and US leadership by creating its own, or will it rather largely adopt, but modify, that order?

China has made impressive progress in its ambitious plans for international outreach and influence.

From western China, through central Asia and on to Europe there now stretches a long belt of infrastructure investment, including oil and gas pipelines, road and rail connections.

A long freight train from China recently made its first trip through the Channel tunnel to England. Other lines run through Moscow to Scandinavia. Similarly, the US$46 billion (S$65 billion) China-Pakistan Economic Corridor (CPEC) includes at one end new highways over the Karakoram Range and at the other the new Chinese-operated Gwadar port on the Indian Ocean.

China has built huge rail and other projects across Africa and Latin America.

The Shanghai Cooperation Organisation includes Russia and four Central Asian countries. India and Pakistan will become full members later this year.

Less noticeably, but just as importantly, China has built up massive holdings in US federal treasury bonds using its large bilateral trade surplus. President Trump's withdrawal from Obama's Trans Pacific Partnership trade pact, which excluded Beijing, has left China free to advance its own Regional Comprehensive Economic Partnership. The new China led Asian Infrastructure Investment Bank is rapidly developing to complement, or rival, the longer established World Bank and Asian Development Bank.

In the realm of 'hard power', President Xi Jinping has sharply cut the size of the Chinese army to modernise its professional effectiveness. The navy has also been expanded and its activity extended into the Indian Ocean, including participation in international patrols against Somalia based piracy.

Re-fuelling and other rights have been established in Sri Lanka and elsewhere, while in Djibouti a full naval base is being constructed at the entrance to the Gulf of Aden, Red Sea and the Suez Canal route to Europe. More controversially, China has laid claim to most of the South China Sea on the basis of the famous 'dotted line' on an old Chinese map. It overlaps the maritime areas of Vietnam, Philippines and others. Likewise it claims much of the East China Sea on the basis of islands also claimed by Japan.

These conflicting claims involve not only sovereignty issues and freedom of maritime movement but also important fishing resources and potential offshore mining, especially for hydrocarbons. China has fortified its position by artificial expansion of islands for airstrips and military facilities.

The US claims to have evidence showing that China is now adding missile sites. In addition to overflights the US has sent a naval carrier force into the disputed areas to reassert freedom of navigation. Analysts, alarmed by the risk of military confrontation or accidental incident, have noted China's recent resumption of purchases of US federal treasury bonds and now its ban on imports of North Korean coal as possible gestures to Washington to reduce bilateral tension.

How the relationship between China and the Trump administration will develop is clearly significant. There seems some risk if President Trump follows up his campaign allegations of currency manipulation and unfairness as reasons behind the massive bilateral US-China trade imbalance. In fact, rather than lower the renminbi to support its exports, China has for over a year been trying to support its currency. The possibility of any new US restraints on imports of Chinese consumer goods, beyond some existing US and EU cases under World Bank rules, is already alarming US importers such as Walmart.

As the new US administration slowly takes shape some good key secretary level appointments are encouraging. Together with Vice President Mike Pence they are likely to provide advice to a President lacking in experience. Trump may or may not take that advice. Under the checks and balances of the US constitution both the courts and Congress can limit Presidential power, particularly with respect to legislation. However, the executive powers of the White House remain formidable.

On the Chinese side there is fortunately less uncertainty. President Xi Jinping faces an important Chinese Communist Party Congress meeting this autumn but this is likely to mark a further consolidation of his power, rather than herald any great change of established policy, unless in response to new challenges from Washington. Despite Chinese assertiveness in the South China Sea, its military modernisation, CPEC and the One Belt, One Belt, One Road (OBOR) outreach, China's present ambition seems primarily regional. In military terms the US remains the only superpower.

China is still a middle-income country and analysts are divided on whether it can follow the examples of South Korea and Poland by escaping the "middle income trap". Some point to its aging population, its enormous debt and its problems of excessive investment. On the other side, it is argued that technology can make up for the decline in working age population and the debt is predominately domestic. It has huge currency reserves, positive trade balance and the central bank has an excellent record of skilful use of fiscal and monetary policy.

China appears to be going ahead in a positive manner.