May 18, 2017 10:00 am JST

Michael Vatikiotis: What China's 'Belt and Road' bonanza means for the region

Much-needed infrastructure investments come with strings attached

Chinese President Xi Jinping poses with world leaders and delegates attending the Belt and Road Forum in Beijing on May 14. © Xinhua/AP

Superpowers emerge in similar ways. The United States was the most powerful element in a victorious allied coalition that defeated fascist Germany and Imperial Japan. After the war ended in 1945, the U.S. used billions of dollars to help rebuild war-torn Europe in a bid to check the advance of the Soviet Union.

China's debut as a global superpower takes a leaf out of Washington's book. By spending billions of dollars on developing infrastructure across the entire Asian landmass, Beijing hopes to check the influence of the West, especially the U.S., in what has been characterized as a profound challenge to the existing global order.

When Chinese President Xi Jinping first mooted the Belt and Road Initiative while visiting Central Asia in 2013, many observers were skeptical. Not any more: The gathering of 29 national leaders in Beijing in the middle of May could be seen as a "coming out" party of sorts. The assembled leaders cheered China's progress in stringing the land belt and forging the maritime Silk Road linking Europe with Asia. Among them was the prime minister of distant Greece, whose government supported China's decision to invest in his country's main port of Piraeus.

Looking beyond the trans-Asian train routes, the improved desert highways and the strategically positioned far-flung ports, the question is how China really sees itself in the world. Is the initiative, as Chinese officials characterize it, a way to pool resources to face the challenges of globalization? Or does it signal an intention to secure a sizable economic hinterland? More importantly, how does a country that is still regarded as developing, and which imposes strict controls on society, navigate constructively beyond its borders?

INTERVENTIONISM ON THE RISE For decades, China has resolutely resisted overseas intervention, citing the principle of mutual noninterference agreed to with India in 1954. But today there is little doubt that intervention is becoming a significant element of China's foreign policy. These interventions vary in quality and effect.

On the more constructive side, Chinese diplomats are deeply involved in facilitating peace talks between the government of Myanmar and ethnic armed groups that hold territory along the Chinese border. But China has also increasingly asserted its right to apprehend its citizens in third countries, as seen with the refoulement of around 100 Uighur refugees from Thailand in 2015.

This creeping assertion of extraterritoriality worries ethnic Chinese outside the mainland. "Singaporeans are more like the Chinese in China than any other Chinese in Southeast Asia, and so that can give the China-born Chinese the impression that they're exactly the same as in China," commented Singaporean Chinese scholar Wang Gungwu in a recent interview.

Belt and Road economic investments are usually accompanied by offers of bilateral military aid and cooperation in Southeast Asia. In the Philippines, China has offered help to combat piracy in the Sulu Sea, a long way away from Chinese claims in the South China Sea. In Cambodia, which has had a close relationship with China for some years, analysts see the government's recent decision to terminate joint exercises with the U.S. military as a byproduct of increasing military aid and cooperation from China.

All this makes the "One Belt, One Road" program, as it is also known, look like a delivery vehicle for China's strategic interests.

There are those who argue that the overriding logic of the Belt and Road Initiative is economic. "China wants to consolidate its position at the center of the global supply and manufacturing networks, which will be the key to the global economy over the coming decades," Australian academic Hugh White wrote recently. The initiative's emphasis on connectivity and the prospect of lucrative infrastructure deals across Asia has certainly drawn praise. But critics warn that much of the estimated $500 billion earmarked for investment may end up being wasted on idle, underused capacity.

In economic terms, the initiative is no magic bullet. Chinese investors and developers are subject to the same constraints as others -- the policy uncertainty of Indonesia's mining and energy sector, or the racial quotas of Malaysia's New Economic Policy. China's bid for railway projects in Thailand has floundered over the terms of financial investment and restrictions on land ownership.

REGIONAL UNEASE All the same, the speed and insistence of China's drive for connectivity makes many in the region nervous. The official Belt and Road website offers a breathless list of opportunities and benefits, from tapping market potential, promoting investment and creating demand for jobs to enhancing people-to-people exchanges that generate peace and prosperity. Many will wonder, though, to what extent they want their development strategies to be aligned and coordinated with China.

To some degree that weaving of interests is already happening. Take the case of e-commerce. Both Malaysia and Thailand have been courting Jack Ma Yun, who runs the online marketing conglomerate Alibaba Group Holding with a customer base of more than 2 billion. Ma recently bought a controlling stake in Lazada Group, the sizable Singapore-based online shopping platform, and has announced plans to build a regional distribution hub in Kuala Lumpur.

It is also hard to detect any countervailing force. The European Union is perhaps Asia's largest trading partner overall, but it lacks the coordinated, focused vision of development that China is now articulating. Japan may be more focused, but it lacks the financial firepower. Similarly, while the U.S. has by far the largest capacity to project military power in the region, its corporations lack the deep pockets or credit lines to extend across Asia.

Resistance may therefore be futile. Far better for regional partners to work closely with China to maximize the advantages and minimize the risks. The advantages lie mainly in China's willingness to invest in much-needed infrastructure -- upgrading roads, railways and adding power generation capacity in Indonesia, for example.

The risks are that these projects come with strings -- imported Chinese labor that is socially and economically intrusive, or, as with Thailand's recent decision to buy Chinese submarines, allegations of a lack of transparency. Managing these risks will require Belt and Road partner governments to insist on more equitable, transparent terms and conditions, which is hard if they do not have alternative options.

China's response to these concerns is to croon that its initiative aims to be "harmonious and inclusive." However, just as the U.S. used its aid program to spread influence and engineer political outcomes in mainland Southeast Asia half a century ago, it is hard to shake the notion that China is using the program to fulfill President Xi's bold desire to be a global order builder, establishing new rules and facts on the ground that principally benefit China.

Michael Vatikiotis is Asia director of the Centre for Humanitarian Dialogue. His new book "Blood and Silk: Power and Conflict in Modern Southeast Asia" will be published by Weidenfeld and Nicolson in June.

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