#85 China and the rest of the World

China’s Overseas Policy: Part 1

The final two blogs on China in this series concern her role in the world. The first of these blogs below offers an overview of the Chinese historical context to the development of her foreign policy. It also provides a discussion of the creation of her 21st-century foreign policy, including new global initiatives like the Belt and Road Initiative and the Asian Infrastructure and Investment Bank.

Chinese History and Foreign Policy

Before China was invaded in 1842, she had hundreds of years of experience in connecting with countries and peoples who were not as 'advanced' technically and politically as herself. Statecraft with foreign regimes had a long heritage. Understanding China's present-day statecraft requires an understanding of her past.

Internally, China's religion was Buddhism/Confucianism. There was never a rift on the scale of the Protestant revolution, as in Europe. Buddhist beliefs remain widespread in China today, even among many members of the Communist Party.

Western perceptions of Chinese overseas relations have been obscured by the demands of the Chinese monarchy to kowtow (Kau tau or ketou, a mark of deep respect) when they were first introduced in the 1790s. In a very different world, forms of obeisance were understood ritually as the character of the relationship. Ritually, neighbouring countries were required to accept China as a 'big brother'. In return for such acceptances, China opened trade relations, offered access to technology (compare intellectual property today), and often China would protect this neighbouring country militarily if attacked.

China practised inter-diplomatic marriages with neighbouring monarchs to encourage peace and cooperation. They encouraged scholarly cooperation and did not practise colonialism Western European style. Between 1405 and 1433, Admiral Zhenghe took a Chinese armada across to Africa to open marine trade from faraway countries, the event was remembered in the recipient country with pride.

The Mao Kun map, usually referred to in modern Chinese sources as Zheng He's Navigation Map, is thought to be a surviving document from the expeditions of Zheng He. It is the earliest known Chinese map to give an adequate representation of Southern Asia, Persia, Arabia and East Africa. This particular section of the map shows Sri Lanka and the east coast of Africa.

Mao, Yuanyi. Wu Bei Zhi. [China: s.n. ; not before, 1644] Map. Retrieved from the Library of Congress.

China in the pre-industrial period never wanted to change the world to its own system of governance, nor did they invade. This policy was in stark contrast to global policy in the present period. Part of the reason why there were such long periods of peace was because ancient Chinese rulers during past dynasties desired to maintain peace and order and develop trade and wealth.

It was this historical background that the new leaders in China inherited after 1949. China had its own heritage of international relations skills to fall back on when considering how to conduct themselves on the world stage. The study of international relations in the English language is largely an American scholarly enterprise, which has a completely different historical background.

Chinese Foreign Policy in the 21st century: learning from the collapse of the USSR

Chinese foreign policy in the period from 1949 to 2000 was largely defensive and determined to maintain the revolution. Only after the Chinese treasury was replete with US dollars, and after they began to accommodate American and other western global companies, could they begin to develop a global policy. This was part of the story; the other vital aspect was the lesson they learned from the Soviet collapse in 1991.

When the Soviet Union collapsed, the regime’s currency/monetary system also collapsed, and the Russian people’s lifelong savings vanished. Hyperinflation hit the country as the USA insisted that the Russian rouble was internationalised, and its value was brought into line with the US dollar. The nation’s resources were plundered through rapid monetisation and a vast influx of foreign financial capital as part of the new system. The Chinese reading of this situation was that their own nation’s overall economic system had not been monetised. Because the Soviet system had remained outside the global system, just as the Chinese system had, most of the physical industrial assets had not been monetised. This lack of monetization referred to all the state-owned products, like houses, roads, railways and very much more. Commodities that were not open to being bought or sold.

The Chinese response was that they began to monetise their entire system of physical assets after 1992, known as marketisation. GDP grew massively and immediately. By monetising physical assets, they had set a market price on them. China was still at this time insulated from the world’s system. One consequence was the creation of Sizeable financial blocs and an enormous banking system. China’s banks by the end of the 1990s controlled 70% of the country’s capital funds. The other anomaly that occurred at this time was that the agricultural sector was monetised at this time. The peasant economy which also had had a low degree of monetization rapidly became monetised. One unforeseen consequence was the disparity in wealth between the urban world and the countryside.

These changes posed major new challenges, which the party and government again overcame, but with many difficulties. By 2000, China was ready to enter the world openly with its new huge state-owned banks and investment opportunities. In practice, financial marketisation took five years, from 1998 to 2003. China had by then a gigantic monopolistic financial sector in line with global monopoly-finance in Europe and America. Moreover, China was in charge of its financial future and its currency.

It was in this context that we need to view China’s global Bretton Woods type initiatives around the world. It was from this time that China began work on a global basis with a global policy, unlike anything that had occurred in the USSR.

At present, China has created several entirely new financial and monetary systems on a global scale which challenge the still existing infrastructure set up by the USA at Bretton Woods in 1944. These being the World Bank and the International Monetary Fund. And as with so much else that is Chinese, the question remains: how to assess these initiatives. Are they a direct challenge to the USA’s ascendancy as a world power? Do they provide support for industrialisation across the world, something which is so clearly missing from the Bretton Woods system of infrastructure?

China’s Bretton Woods Type Global Initiatives

The only past great financial global initiative since 1945 was the Marshall plan, which lasted from 1947 and finished in 1952. The plan’s purpose was to provide recovery resources for Japan and Germany, as well as the countries in Europe to recover from the devastation caused by the war. The Marshall plan had an overriding purpose to provide resources sufficient so that Communism would not be attractive to the nations on the receiving end, and at the same time to provide markets for their industries and companies. The plan lasted a relatively short time and specifically did not provide special funding for the newly developing nations that were arising from their colonial periods. Since that time, no nation has attempted to provide infrastructure support for countries that have wished to industrialise and catch up with the already rich Western nations.

Andrzej Duda and Xi Jinping signing a joint declaration on the establishment of a comprehensive strategic partnership between China and Poland in 2016. Photo by Andrzej Hrechorowicz. Retrieved from Wikipedia, CC BY-SA 4.0.

Here is a list of elements in the Chinese move to be a global player since the beginning of the 21st century:

• The Belt and Road Initiative 

• The Asian Infrastructure and Investment Bank (AIIB)

• The Shanghai Cooperation Organisation (SCO)

• China and East European Countries (CEEC)

The first of these, the Belt and Road system, is altogether larger and of a different global character. This not only plans to connect Eurasia with roads, ports, railways, and telecommunications; it plans to make the transport of goods and services faster, more efficient, and cheaper. Few small countries in Africa or elsewhere have been exempt from these policies. From China's point of view, this is a fundamentally strategic transnational arrangement and an outlet for her excessive production capacity. The Belt and Road system provides China with a role outside of any USA centred system and brings her in direct dialogue with nearly every country around the globe.

The Belt and Road system is likely to reclaim China's centrality around the world. China’s railways by 2015 were already earning 41% of global railway revenue. In Asia, Laos, Malaysia, Singapore and Thailand will be linked with high-speed arteries with cities in China. The Belt and Road is a mega-project, unlike anything before it.

A map from 2017 showing proposed routes for the Belt and Road Initiative. China in Red, the members of the Asian Infrastructure Investment Bank in orange. The proposed corridors in black (Land Silk Road), and blue (Maritime Silk Road). Retrieved from Wikimedia, CC BY-SA 4.0.

A map showing the countries that are participating in the Belt and Road Initiative in 2019:

Red - Initiator of the Belt and Road Initiative
Blue - Countries which signed cooperation documents related to the Belt and Road Initiative
Yellow - Only participate in Belt and Road summit

By Owennson, CC BY-SA 4.0, retrieved from Wikimedia Commons.

Many have argued that the Belt and Road system is a new colonial initiative. Certainly, China insists on importing Chinese migrant workers into each country where it builds railways and roads, and this alone causes profound tensions. While profit is not the main driver in the Belt and Road system, China offers attractive loans which still require countries to repay the capital costs, and has already left Laos, Sri Lanka, and Venezuela, for instance in considerable debt. This may cause difficulties ahead.

The second element, the AIIB, is the first world bank outside the control of the Western powers and has already nearly 90 members.

Thirdly, the SCO, founded in 2001 is intended to demilitarise member states and includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. It is intended to be a bulwark against the USA in Central Asia. The group has a population of 1.5 billion people: a quarter of the world’s population. These are still early days for the SCO; it has opportunities to develop economic and energy policies, revive old trade routes, and integrate with Beijing's Belt and Road system. And as the USA's more recent belligerent foreign policy widens its scope of denying a country dollars through the creation of sanctions, the opportunities for the SCO become ever more important. Talk of an SCO Development Bank has its obvious attractions.

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