Economic statecraft, peaceful rise and win-win game: a framework to understand China’s growing influence in the world, by Bruno Hendler

China’s post-2008 international insertion can be analyzed through three major vectors that we call “channels of external projection”. First, the political economy channel, with the rise of Chinese companies in global value chains, resulting from a domestic alliance between state and capital, and whose objective is the expansion of the new accumulation regime in China that took shape since 2008. Second, the strategic channel, with the shift in paradigm in the armed forces and the increasing investments in the military sector, holding the main objectives of maintaining the country’s sovereignty and territorial integrity (including sensitive issues such as separatism, terrorism and Taiwan), a more balanced relation with the United States and the projection of power in the Asia-Pacific region. And finally the channel of diplomacy and the “speech act” in the broader sense, meaning the use of symbolic and institutional means in bilateral and multilateral fora to achieve political economy and security goals.

In this triangular dynamics, the political economy and strategic pillars are the most determinant and the symbolic one tends to follow in accordance to the Chinese bureaucracy and its external interlocutors. These three spheres have undergone fundamental changes since 2008 and are in the DNA of the Belt and Road Initiative (BRI). Thus, the objective of this essay is to propose a theoretical model to analyze the international insertion of China and its main vectors inspired in Immanuel Wallerstein’s (2006) proposal of dialogue among different social sciences. Three paths of research remain open and should be addressed in a more profound study: how domestic forces are shaped by foreign constrains; how these forces are projected abroad (our proposal); and the different responses from foreign interlocutors.

China’s channels of projection since 2008

The political economy channel has undergone profound transformations since 2008. Based on a successful and complex struggle between the government and the national bourgeoisie, there was a complexification of economic relations with the outside world under state guidance (NOGUEIRA, 2017). If they were driven by structural reforms, FDI attraction, public investment and export incentives in the 1990’s and 2000’s, foreign trade remained important, but it started to share attention with other sectors that make up a complex “toolkit” of economic projection, which we call economic statecraft. Leonard (2016) points out China’s five major tools since the late 2000’s: trade, investment, financial services, Renminbi internationalization and logistics integration through BRI (HENDLER, 2017).

These processes arise from the saturation of a model based on public investments and exports surplus. One of the main internal constraints that impel this economic statecraft is the idle capacity of numerous productive sectors, which enhances a growing reliance on infrastructure works, an inflation of the real estate market, indebtedness of the provinces and local governments, and a high leverage rate of banking and non-banking sectors (PINTO, CINTRA, 2017, p. 384). In order to mitigate these tendencies, state banks such as the Export-Import Bank of China (China Exim Bank) and the China Development Bank (CDB) started to support the internationalization of public enterprises through cheap credit (Idem, p. 9). In addition, China’s high savings rate and corporate governance structure were combined with the distorted capital market to support the Chinese OFDI[1]. Thus, with the high competition in the domestic market, exploited by domestic and foreign companies, and the competitive leap of Chinese firms, the country’s OFDI rose considerably in the mid-2000s and 2010’s.

This way, Chinese companies started to invest abroad to gain more control over value chains and to access new technologies, markets and resources (HENDLER; RODRIGUES, 2017). The approach to African countries, for example, has taken place through internal articulations that bring together the Chinese government, the financial institutions (Exim and CDB) and the state companies (RIBEIRO, 2017) and these processes denote a change of focus from developed to developing countries. In short, the political economy external projection through the state’s dirigisme in vital sectors like energy, infrastructure, food and technology has functioned as a relief for internal constraints.

The strategic channel underwent significant changes in the last decade as well. In quantitative terms, there were no surprises because public spending in the military remained around 2% of the GDP since the late 1990’s. However, there was a sharp growth in absolute values: the official data indicates that, from 2008 to 2016, investment jumped from US $59 billion to U$146 billion, but there is evidence that the Chinese government minimizes the indicators. Other sources[2] point to a leap from around U$110 billion to US$225 in the same period (CSIS)[3]. Thus, in spite of a relative decline in military spending in 2017 (1,3% of GDP)[4], the absolute values are still rising and remain much higher than other Asian countries’ spending.

Nevertheless, the great strategic shift is qualitative and consists in a military doctrine change: from the extensive and defensive logic (focused on quantity of troops and armaments for border protection) to the intensive and offensive one (with a focus on non-conventional sectors, such as space program and cyberwar, and a greater emphasis on power projection in the Asia-Pacific scenario and beyond through the Navy and the Air Force). These changes began in the 1990’s and 2000’s, with cuts in personnel, improvements in the industrial-military complex and integrated joint operations in the armed forces (FISHER JR, 2010, p. 67), gaining momentum in the last decade with the construction of aircraft carriers, submarines and other vessels capable of navigating beyond the Asia-Pacific’s first island chain. Finally, there is a growing focus on informatization of command and control lines, air force modernization and investments in cyber and space sectors, much in accordance with the guidelines proposed in the book unrestricted warfare a decade before[5].

Above these doctrine changes are the permanent strategic concerns: separatism (Tibet and Xinjiang), the status of Taiwan, the Koreas issue and the relations with the great powers. But one of the main changes, which is linked to the new military doctrine, refers to the maritime territorial disputes with Japan and the Southeast Asian countries. The military asymmetry with the later and the historical resentments with the former are elements of growing relevance in Chinese strategic calculation and reinforce a doctrine more focused on the projection of naval power.

The interface between the political economy and the strategy channels is the hard core of Chinese post 2008 external projection. The asymmetric economic interdependence that China has built with its neighbors has been shaping their behavior on sensitive topics such as Taiwan and the South China Sea, and the more dependent on Chinese capitalism, the less combative these countries tend to be. Another issue is that Chinese state owned enterprises (SOE´s) have operated in strategic sectors of neighboring countries such as energy, communications and transport and can use it to blackmail or threaten governments in case of a military escalation. In that sense, Chong (2014) presents an interesting debate on Singapore’s cyber vulnerability towards China. In a complementary way, the strategic channel is also important to the political economy one because it ensures the safety of sea lanes and generates income from the exports of the industrial-military complex products.

Finally, the symbolic and institutional channel goes far beyond traditional diplomacy and encompasses the activities of politicians such as Xi Jinping and Li Keqiang, academics, military, media and envoys to international organizations. Naturally, Chinese diplomacy has its own dynamics, but its performance tends to be an extension of the other two channels both in bilateral and multilateral contexts.

The interface with the political economy sphere is clear by the diffusion of the “win-win game” motto, which creates a positive image of Chinese enterprises through media and political direct support in negotiating contracts with foreign firms and governments. On bilateral relations, particularly with developing countries, the Chinese government has promoted cooperation projects in several topics such as agriculture, trade, finance, investment, tourism, technology, circulation of people, etc. (CLEMENTE, 2016). In the multilateral level, Beijing has sponsored and/or actively participated in hundreds of medium and high-level meetings, strengthening the image of China as a responsible partner and a promoter of development.

The symbolic interaction with the strategic channel has appeared on the so called military diplomacy[6], with China’s participation in joint military exercises, training of foreign forces, transfer of arms and military equipment, and humanitarian aid. From 2003 to 2016 Beijing participated in 349 joint military exercises with 56 countries, ranging from combat training to operations of hospital-ships in poor countries in Africa. In the multilateral arena, China has been actively participating in UN peacekeeping missions and joined regional institutions and regimes such as Asean Regional Forum and the Declaration of Conduct in the South China Sea. Thus, the military diplomacy reinforces the image of China as a rising, responsible and nor revisionist power, concerned with peace and stability in its regional and global environment.

Theoretical framework for China’s vectors of external projection

The diagram below presents our methodological approach to understanding China’s international insertion post 2008, displaying the three channels and their intersections.

China’s channels of external projection

Source: elaborated by the author

Naturally, this model is a first methodological effort and requires a deeper study that takes history and geographical boundaries in consideration. On China’s relations with Latin America, for example, the political economy vector is still preponderant, in spite of recent institutional developments. Africa is an intermediary case in which the political economy arena prevails, but the strategic and symbolic-institutional channels are in a more advanced stage. And Southeast Asia presents not only a more balanced relation among the three spheres, but also a much more intense and entangled interaction with strong economic, security and symbolic-institutional ties.

Three of the main lines of research on China are at the intersections of this model: 1. The economic statecraft as the field of Chinese capitalist expansion, shaping the behavior of other states in accordance to Beijing’s strategic and economic interests; 2. The dissemination of the concept of economic development in a positive-sum (win-win) game played in the Chinese board, with institutions and regimes created and/or supported by the Asian giant; and 3. The debate on the peaceful rise of China and whether the symbolic diplomatic “speech acts” and the adherence to institutions and regimes reinforce the non-revisionist and non-bellicose nature of China in the 21st Century.

Nominally, the BRI (#4 in the diagram) is all and nothing at the same time. The initiative has no declared goal and, precisely for this reason, any breakthrough can be seen as success and any setback can be disguised as being beyond the original idea. Nevertheless, the initiative is at the center of contemporary research because it is the product of the three channels of China’s external projection. It is the economic statecraft per se with a narrative label brought from the ancient history of China and a loose institutional apparatus that paves the way for China’s strategic and political economic goals.

Finally, this essay did not focus on the contradictions of China’s rise, but they are relevant and may be presented in another study in a mirrored version. That is, the win-win game, the peaceful rise and the economic statecraft unfold a series of contradictions that build new relations of asymmetry and submission and although they do not fit perfectly in the classic concepts of imperialism (RIBEIRO, 2017, p. 138) they must be analyzed in a critical perspective. And the BRI, which is at the intersection of these three vectors, should be a good starting point for this methodological perspective.

References

CHONG, Alan. China and Southeast Asia: offline information penetration and suspicions of online hacking – strategic implications from a Singaporean perspective. In, VENTRE, Daniel (ed.). Chinese Cybersecurity and Defense. London: ISTE ltd. And John Wiley & Sons Inc, 2014.

CINTRA, Marcos A.M; PINTO, Eduardo C. China em transformação: transição e estratégias de desenvolvimento. Revista de Economia Política, vol. 37, nº 2 (147), 2017.

CLEMENTE, Tina S. Understanding the Economic Diplomacy between the Philippines and China. In International Journal of China Studies, Vol. 7, No. 2, pp. 215-233, August 2016.

FISHER JR, Richard D. China’s military modernization: building for regional and global reach. Stanford: Stanford University Press, 2010.

HENDLER, Bruno. Transições estruturais na economia chinesa e a Nova Rota da Seda: uma ideia convenientemente vaga. Mundorama – Revista de Divulgação Científica em Relações Internacionais. [Acessado em 01/12/2017]. Available in: <https://www.mundorama.net/?p=23666>.

LEONARD, Mark. Introduction. In: Geo-economics with Chinese Characteristics: How China’s economic might is reshaping world politics. World Economic Forum, Regional Agenda, 2016.

NOGUEIRA, Isabela. Estado e Capital em uma China com Classes. IE-UFRJ, Discussion Paper, TD 029 – 2017.

RIBEIRO, Valéria L. A expansão chinesa recente e novas determinações do imperialismo no século XXI. Belo Horizonte: Estudos Internacionais, V. 5, N. 1, 2017.

RODRIGUES, Bernardo S; HENDLER, Bruno. Investimento Externo Direto chinês na América do Sul e Sudeste Asiático: uma análise de escopo, valores e setores-alvo. Trabalho apresentado no Congreso Nacional de ALADAA (Sección Argentina), 2017.

WALLERSTEIN, Immanuel. World-system analysis: an introduction. Duke University Press, 2006.

Notes

 

  1. Outward Foreing Direct Investment.
  2. US Department of Defence and the Stockholm International Peace Research Institute.
  3. Source: https://chinapower.csis.org/military-spending/#chartMoreInfo
  4. Source. http://news.xinhuanet.com/english/2017-03/04/c_136102281.htm
  5. Unrestricted Warfare is a book written by two Chinese Military Officers, Qiao Liang (乔良) and Wang Xiangsui (王湘穗) and published in 1999 that points to China’s non-conventional means of defeating stronger opponents, namely the United States.
  6. Source: https://chinapower.csis.org/china-military-diplomacy/

 

About the author

Bruno Hendler is a PhD Candidate on International Political Economy at Federal University of Rio de Janeiro.

How to cite this article

Mundorama. "Economic statecraft, peaceful rise and win-win game: a framework to understand China’s growing influence in the world, by Bruno Hendler". Mundorama - Revista de Divulgação Científica em Relações Internacionais,. [Acessado em 13/12/2017]. Disponível em: <http://www.mundorama.net/?p=24317>.
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