China Takes the Stage

Everyone take notice: the year 2014 will be known for one of the most significant shifts in Chinese foreign policy since the ‘reform and opening’ policies of Deng Xiaoping thirty-five years previously. Less than three years into the administration of China’s current president, Xi Jinping, the country’s international interests have expanded to the point where their impact can be experienced well outside of the Asia-Pacific and indeed in most areas of the world. Even more significantly, these developments have been matched by a rising confidence in China’s capabilities on a global level, a change which has been repeatedly demonstrated over the past year.
In a speech to the Australian parliament in Canberra in November of last year, President Xi remarked that China was taking on the persona of a ‘big guy in the crowd’ and that ‘others will naturally wonder how the big guy will move and act, and be concerned that the big guy may push them around, stand in their way or take up their place,’ However, Xi stressed the point that China wanted to grow in cooperation with the international community, and that the country’s own history demonstrated that warlike states, regardless of their size, were consistently doomed to eventually fail. Despite ongoing disputes between Beijing and some of its neighbours over maritime claims, (the placing of an oil rig in disputed waters with Vietnam in mid-2014 was looked at with much alarm along China’s periphery), the diplomatic tone from China became more conciliatory as the year progressed. Efforts were also made to improve the previously toxic relations between China and Japan, culminating in a handshake between President Xi and Japanese Prime Minister Shinzo Abe, which redefined the word ‘uncomfortable’. China is also keeping a wary eye on potential American security policies in Asia as a result of its announced ‘pivot to Asia’ strategy, (also known as a ‘rebalancing’ policy), since 2011. Although Washington has insisted that the Asia-Pacific will remain the primary focus of American military concerns, global events elsewhere have often proven a distraction, including the Russia/Ukraine conflict, the rise of the ‘Islamic State’ in Iraq and Syria, and other Middle East violence including in Libya and Yemen.

In 2014, China’s military budget continued to grow, reaching US$131.6 billion, an increase of over twelve percent from the previous year but still representing maybe a fifth of US defence spending that year. Beijing has sought to craft a foreign policy which placed an emphasis on cooperation and development in the wake of its growing international power. In a speech last October to a Communist Party conference on foreign affairs, President Xi outlined his ideas for China’s new global priorities. Some of the concepts he explained were nods to the past, including the Five Principles of Peaceful Coexistence, a Maoist-era idea which stressed the importance of sovereignty in international relations, and the preference for a multipolar world as opposed to one dominated by a single superpower. However, many updated views were also articulated, such as the need for ‘a new model of great power relations’ with the United States and a ‘great rejuvenation’ for China, suggesting that the country was in the process of returning to its previous elevated status in global affairs. This language is a far cry from the Deng Xiaoping era, when China was encouraged to ‘hide its capacities, bide its time,’ as well as from the policies of Xi’s immediate predecessor, Hu Jintao, who cautiously called for China to evolve into a ‘moderately prosperous society’.

The year 2014 may also mark the transition of China into the world’s largest economy, at least in terms of purchasing power parity. However, this status must be tempered with the realisation that income per person remains low compared with that of Western levels, and that Beijing is still seeking to address the critical problems of poverty, income inequality, corruption, and developing a welfare state. The country has also continued its attempts at transforming its huge market power into the development of new trade agreements and organisations. For more than two decades, Beijing engaged Western-led financial institutions and accepted their rules and guidelines. Today, China has become more comfortable with creating new bilateral and multilateral economic agreements which have not only continued to bolster the Chinese economy, but have also created potential challenges for the post-World War II organisations, created by American and European initiatives, which had grown to dominate the global financial system. One example is in the area of free trade agreements. In 2014, China FTAs came into effect with Iceland and Switzerland, a deal with Australia was signed, and another is pending with South Korea, (Beijing had also been negotiating an FTA with Norway, starting in 2008, until the process was abruptly halted following the diplomatic dispute two years later). It is easy to forget that until the turn of the century, China was wary of the entire concept of free trade negotiations, let alone with advanced economies, out of concern that the country’s economy was simply not ready for such commitments. Beijing is now one of the most enthusiastic supporters of liberalised trade in Asia and globally.

On a regional and global level, China’s economic confidence can be viewed from a variety of angles. In 2014, Both Xi Jinping and Chinese Premier Li Keqiang were especially active in summit diplomacy in Europe as well as in Africa, Latin America, Oceania and South Asia, often for the purposes of signing new economic and trade agreements. In the Far North, China has been an active player since gaining observer status in the Arctic Council in 2013, strengthening economic links with some Arctic economies, including Russia, and is seeking to play an enhanced role in economic developments in the region. This type of government-to-government diplomacy is not new for China, but what has changed is that the country has become much more interested in developing regional and international organisations in addition to engaging existing ones. For example, Beijing is a major policy actor within Eurasian security organisations such as the Shanghai Cooperation Organisation (SCO) and the Conference on Interaction and Confidence-Building Measures in Asia (CICA). Beijing is also at the forefront of a new assembly of large emerging markets known as the BRICS, along with Brazil, Russia, India and South Africa, an organization which began as an obscure abstract concept but has developed into the largest assembly of large emerging markets in the world. Last year, the BRICS announced the creation of a new lending institution for developing economies to act as an alternative to the World Bank and International Monetary Fund.

Chinese plans for an Asian Infrastructure Investment Bank (AIIB) were accelerated in 2014, with several Asia-Pacific and Eurasian governments signing on. At the landmark summit of the Asia-Pacific Economic Cooperation (APEC) forum in Beijing last November, President Xi promoted the revival of a Free Trade Area of the Asia-Pacific (FTAAP), which would jump-start the long-delayed process of developing a free trade zone to encompass the entire Pacific Rim and, if successful, would become the largest such free trade zone in the world. The FTAAP could also be an alternative to the US-led Trans-Pacific Partnership (TPP), which encountered diplomatic obstacles over the last year. It was at the same APEC summit that Xi suggested an ‘Asia-Pacific Dream’ for the region to match the ‘China Dream’, which the president began to promote shortly after taking office. As a result of China’s growing economic power on a global scale, many European economies, notably those of France, Germany and the United Kingdom, are considering how better to engage Beijing, perhaps even developing their own ‘pivot to Asia’ policies.

Finally, the Xi government has been developing the framework of a ‘One Belt and One Road’ policy in Eurasia and the Indian Ocean. The ‘belt’ in question would be a series of overland transit routes connecting China with European markets via Central Asia, Russia and the Caucasus region. The ‘road’ is not exactly a road, but rather the enhanced use of the Indian Ocean for Chinese trade with Africa, South Asia and Southern Europe. These ambitious plans remain in the embryonic stages, but their introduction remains significant for a number of reasons. First, although Beijing has called for a reworking of its economic policies to reduce Chinese reliance on exported goods in favour of stimulating its domestic economy in light of the global recession, the development of new trade routes suggests that exports are still very much a priority for Beijing in the near term. Second, these routes, if successful, would further augment east-west trade between Europe and China and promote economic development in the countries along the way. Some commentators have even likened these initiatives as a variation of the US-sponsored ‘Marshall Plan’ for Europe in the late 1940s, although Beijing has been critical of that comparison. Third, these plans are the most visible proof yet that China, after several decades of engaging Western organisations and norms, is now much more comfortable with its great power status and is more open to proposing and developing alternative organisations to those developed by the West.

Beijing still faces daunting political and economic challenges at home, including a slowing economic growth rate, a politically risky anti-corruption campaign and the aftermath of recent demonstrations in Hong Kong. Internationally, Beijing also must contend with diplomatic conflicts over the status of the East and South China Seas, and elections next year in the United States and Taiwan which may also affect China’s security thinking. In short, China is entering a new stage in its foreign policy, one defined by activism and greater confidence and one which will continue to have dramatic effects well beyond its borders.