China and the liberal vision of the Indo-Pacific

Mike Pompeo’s recent speech (titled ‘America’s Indo-Pacific Economic Vision’) at the Indo-Pacific Business Forum hosted by the US Chamber of Commerce in Washington, DC, has been carefully observed across Asia. Beijing has understandably paid close special attention to it. Pompeo emphasized the need for greater connectivity within the Indo-Pacific, while also highlighting the role which the US was likely to play (including financial investments to the tune of $113 million in areas like infrastructure, energy, and digital economy). The US Secretary of State, while stating that this vision was not targeted at anyone, did make references to China’s hegemonic tendencies, as well as the lacunae of Chinese connectivity projects (especially the economic dimension).

The Chinese reaction to Pompeo’s speech was interesting. Senior Chinese government officials were initially dismissive of the speech, saying that such ideas have been spoken in the past, but produced no tangible results.

A response article in the Global Times is significant here. Titled ‘Indo-Pacific strategy more a geopolitical military alliance’ and published in the communist state’s premier English-language mouthpiece, what emerges clearly from this article is that Beijing is not taking the ‘Indo-Pacific vision’ lightly, and neither does it rule out the possibility of collaboration. The article is unequivocal, though, in expressing its skepticism with regard to the geopolitical aspect of the Indo-Pacific vision. Argues the article:

[…] the geopolitical connotation of the strategy may lead to regional tensions and conflicts and thus put countries in the region on alert.

The piece is optimistic with regard to the geo-economic dimension, saying that American investment would be beneficial and would promote economic growth and prosperity. What must be noted is that while the US vision for an ‘Indo-Pacific’ has been put forward as a counter to the Belt and Road Initiative (BRI) of China, the article also spoke about the possible complementarities between the US vision for an ‘Indo-Pacific’ and China’s version of BRI. While Pompeo had spoken about a crucial role for US private companies in his speech, the article clearly bats in favor of cooperation between the Indian, Japanese, Chinese, and US governments, rather than just private companies. This is interesting, given the fact that China had gone to the extent of dubbing the Indo-Pacific vision as “the foam on the sea […] that gets attention but will soon dissipate.”

While there is absolutely no doubt that there is immense scope for synergies between the Indo-Pacific vision and BRI, especially in the economic sphere, China’s recent openness towards the Indo-Pacific vision needs to be viewed in the following context.

First, the growing resentment against the economic implications of some BRI projects. In South Asia, Sri Lanka is a classical example of China’s debt trap diplomacy, where Beijing provides loans at high interest rates (China has taken over the strategic Hambantota Project, since Sri Lanka has been unable to pay Beijing the whopping $13 billion). Even in the ASEAN grouping, countries are beginning to question the feasibility of BRI projects. Malaysia, which shares close economic ties with Beijing, is reviewing certain Chinese projects (this was one of the first steps undertaken by Mahathir Mohammad after taking over the reigns as Prime Minister of Malaysia).

Secondly, the Indo-Pacific vision has long been dubbed as a mere ‘expression’ that lacks gravitas in the economic context (and even now $113 million is not sufficient). Developments over recent months, including the recent speech by Pompeo, indicate that the American Department of State seems to be keen to dispel this notion that the Indo-Pacific narrative is bereft of substance. Here it would be pertinent to point out that Pompeo’s speech was followed by an Asia visit to Indonesia, Malaysia, and Singapore.

The US needs to walk the course and, apart from investing, it needs to think of involving more countries, including Taiwan and more South Asian countries like Sri Lanka and Bangladesh in the Indo-Pacific partnership.

The Indo-Pacific also speaks in favor of democracy as well as greater integration, but countries are becoming more inward-looking, and their stands on democracy and human rights are more ambiguous than in the past. Japan is trying to change its attitude towards immigration, and is at the forefront of promoting integration and connectivity within the Indo-Pacific. Neither the US, nor India, Japan, or Australia have criticized China for its human rights violations against the Uighur minority in Xinjiang province.

Here it would also be important to state that there is scope for China to be part of the Indo-Pacific, but it needs to look at certain projects beyond the rubric of the BRI. A perfect instance is the Bangladesh, China, India, Myanmar (BCIM) Corridor, which India was willing to join, but China now considers this project as a part of BRI.

In conclusion, Beijing can not be excluded from the ‘Indo-Pacific’ narrative, but it cannot expect to be part of the same, on its own terms. It is also important for countries like the United States and India to speak up more forcefully on key issues pertaining to freedom of speech and diversity (and ensure that these remain robust in their own respective countries), given that one of the objectives of the Indo-Pacific vision is a ‘Free and Open Indo-Pacific’.

Hegemony is hard to do: China, globalization, and “debt traps”

As a result of an increasingly insular United States, with US President Donald Trump’s imposition of tariffs, China has been trying to find common cause with a number of countries, including US allies such as Japan, India and South Korea, on the issue of globalization.

While unequivocally batting in favor of an open economic world order, Chinese President Xi Jinping has also used forums like Boao to speak about the relevance of the Belt and Road Initiative (BRI) (also known as the One Belt and One Road Initiative, or OBOR). At the Boao Forum (April 2018), the Chinese President sought to dispel apprehensions with regard to suspected Chinese aspirations for hegemony:

China has no geopolitical calculations, seeks no exclusionary blocs and imposes no business deals on others.

There is absolutely no doubt that the BRI is a very ambitious project, and while it is likely to face numerous obstacles, it is a bit naïve to be dismissive of the project.

Debt Trap and China’s denial

Yet China, in promoting the BRI, is in denial with regard to one of the major problems of the project: the increasing concerns of participant countries about their increasing external debts resulting from China’s financial assistance. This phenomena has been dubbed as a ‘debt trap’. Chinese denialism is evident from an article in the English-language Chinese daily Global Times titled ‘Smaller economies can use Belt and Road Initiative as leverage to attract investment’. The article is dismissive of the argument that BRI has resulted in a debt trap:

It is a misunderstanding to worry that China’s B&R initiative may elevate debt risks in nations involved in massive infrastructure projects. Countries are queuing up to cooperate with China on its B&R initiative, but many Western observers claim the initiative will create a problem of debt sustainability in countries and regions along the routes, especially those with small economies.

The article begins by citing the example of Djibouti in Africa, and how infrastructure projects are generating jobs and also helping in local state-capacity building. It then cites other examples, like that of Myanmar, to put forward the point that accusations against Beijing of promoting exploitative economic relationships with participant countries in the BRI is far from the truth.

The article in Global Times conveniently quotes Myanmar’s union minister and security adviser, Thaung Tun, where he dubbed the Kyaukpu project a win-win deal, but it conveniently overlooked the interview of Planning and Finance Minister, Soe Win, who was skeptical with regard to the project. Said Soe Win in an interview with Nikkei:

[…] lessons that we learned from our neighboring countries, that overinvestment is not good sometimes.

Soe Win also drew attention to the need for projects to be feasible, and for the need to keep an eye on external debt (Myanmar’s external debt is nearly $10 billion, and 40 percent of this is due to China).

The case of Sri Lanka, where the strategically important Hambantota Port has been provided on lease to China (for 99 years) in order to repay debts, is too well known.

The new government in Malaysia, headed by Mahathir Mohammed, has put a halt on three projects estimated at over $22 billion. This includes the $20 billion East Coast Railway Link (ECRL), which seeks to connect the South China Sea (off the east coast of peninsular Malaysia) with the strategically important shipping routes of the Straits of Malacca to the West. A Chinese company, China Communications Construction Co Ltd, had been contracted to build 530km stretch of the ECRL. On July 5, 2018 it stated that it had suspended work temporarily on the project, on the request of Malaysia Rail Link Sdn Bhd.

The other two projects are a petroleum pipeline spread 600km along the west coast of peninsular Malaysia, and a 662km gas pipeline in Sabah, the Malaysian province on the island of Borneo.

During a visit to Japan, Mahathir had categorically said that he would like to have good relations with, but not be indebted to, China, and would look at other alternatives. The Malaysian PM shall also be visiting China in August 2018 to discuss these projects.

Conclusion

While Beijing has full right to promote its strategic interests, and also highlight the scale and relevance of the BRI, it needs to be more honest with regard to the issue of the ‘debt trap’ (especially if it claims to understand the sensitivities of other countries, and does not want to appear to be patronizing). While smaller countries may be economically dependent upon China, the latter should dismiss the growing resentment against some of its projects at its own peril. Countries like Japan have already sensed the growing ire against the Chinese, and have begun to step in, even in countries like Cambodia (considered close to China). A number of analysts are quick to state that there is no alternative to Chinese investment, but the worries in smaller countries with regard to Chinese debts proves the point that this is not the case. China needs to be more honest, at least, in recognizing some of its shortcomings in its dealings with other countries.