Europe, China, and a Stable Indo-Pacific Order

I-wei Jennifer Chang

I-wei Jennifer Chang is an independent analyst on Chinese foreign and security issues based in Washington, D.C. Previously, she was Senior Program Specialist in the China Program at the U.S. Institute of Peace.

Chang received a Bachelor’s degree in Asian Studies from Georgetown University’s School of Foreign Service and two Master’s degrees in Journalism and International Relations from the University of Maryland. She is fluent in Mandarin Chinese.

On November 23, 2018, gunmen linked to Baloch separatist groups from Pakistan’s restive southwest province killed four people in an attempt to strike the Chinese consulate in Karachi. Although no Chinese citizens were killed, the Baloch Liberation Army, which claimed responsibility for the attack, said in a statement, “We will not tolerate any Chinese military expansionist endeavors on Baloch soil,” amid reports that China is building a naval base at Gwadar Port in Balochistan. More broadly, Baloch separatist groups have made clear their opposition to the China-Pakistan alliance, which they believe supports Pakistan’s federal government and military at the expense of local autonomy and benefits for Balochistan.

Baloch terrorist attacks on Chinese workers are not new. Several Chinese engineers were killed by Baloch separatists while working on construction projects in the region in the early 2000s. But the scale of Chinese investment and presence in the region has dramatically changed. Since the China-Pakistan Economic Corridor (CPEC)—now worth $62 billion in energy, infrastructure, and connectivity investments in Pakistan—was launched in April 2015, Chinese workers and engineers have poured into Balochistan to develop Gwadar Port and surrounding hotels, housing, and other facilities. Which groups will actually benefit from Gwadar’s development—Chinese companies, Pakistan’s federal government and military, or the local ethnic Baloch minority? For Baloch nationalists and separatists, these “development” projects actually facilitate the Pakistani government’s expansion of economic and military control over their region.

The Baloch issue is not easily resolvable for Pakistan’s central government, given the historical marginalization of the region, Pakistani military campaigns, and India’s obscure role in agitating for Baloch separatism to exert pressure on its strategic rival. Therefore, local Baloch resentment against Chinese investment projects has grown. Attacks on Chinese interests are likely to continue in the foreseeable future as Chinese companies progress in the next phases of Gwadar’s development. Chinese presence in Gwadar will grow over the next several decades, estimated to reach 550,000 by 2023, and will create more tensions with the local population, unless policy remedies can sufficiently address Baloch economic and political grievances and offer more equitable distribution of benefits.

“Belt and Road” Challenges Western Norms and Exacerbates Existing Grievances

Chinese president Xi Jinping’s signature Belt and Road Initiative (BRI)—a massive, transcontinental mega-project utilizing economic, financial, infrastructure, and other connectivity links to bring China and the world closer together and propel China’s soft power—has now become the epitome of American and European fears of China’s global geostrategic designs. Western capitals have come to view BRI, along with China’s increased assertiveness in East Asia, as part of China’s grand strategy to challenge the Western-led and rules-based international order erected after World War II. For them, a China-led regional or global order would mean revising the rules of the game, weakening international norms and institutions, and promoting corruption and bad governance. Furthermore, Chinese economic practices could further destabilize financially weak and politically unstable states, as well as worsen political, economic, and social cleavages in these countries.

Western capitals have come to view BRI, along with China’s increased assertiveness in East Asia, as part of China’s grand strategy to challenge the Western-led and rules-based international order erected after World War II.

European countries are concerned that BRI will worsen existing conflicts and internal divisions around the world. Ironically, some of the major existing conflicts are rooted in the historical legacy of European colonialism. From Myanmar’s ethnic conflicts to tensions between India and Pakistan, the European and Chinese roles have been reversed, with former colonial powers seeking to offset the negative implications of Chinese economic and political actions in conflict-affected regions.

Back home in Europe, Chinese investments have sowed divisions between countries in Western Europe, on the one hand, and those in Central and Eastern Europe, some of which have formed a 16+1 grouping with China, on the other hand. In 2016, Greece and Hungary refrained from criticizing China’s aggressive actions in maritime and territorial claims in the South China Sea. In June 2017, Greece vetoed a joint EU statement at the United Nations that criticized China’s human rights record. Former German foreign minister Sigmar Gabriel warned that “if we don’t develop a [European] strategy regarding China, then China will succeed in dividing Europe.”

European governments also believe that Chinese-backed infrastructure projects are saddling developing countries from Asia to Africa with debt, which will lead to greater Chinese political influence in those countries and toward a Chinese model of development that ignores the EU’s high social, economic, and environmental standards.

European governments also believe that Chinese-backed infrastructure projects are saddling developing countries from Asia to Africa with debt, which will lead to greater Chinese political influence in those countries and toward a Chinese model of development that ignores the EU’s high social, economic, and environmental standards. Chinese economic engagement in the Balkans, such as in Serbia, is creating alternative incentives that move these countries away from adherence to EU standards, which, in turn, may not only delay their accession to the EU, but also fuel corruption, undermine governance reforms, and facilitate state capture. Europeans do not want to see scenarios where China attaches political strings to its economic support to financially unstable countries, particularly in Central and Eastern Europe, but also other parts of its immediate neighborhood such as North Africa and the Middle East.

U.S. Indo-Pacific Strategy Stokes Sino-Indian Tensions

Unable to compete with the cash-flushed Chinese state companies that are often willing to engage in murky deals with host governments, at times flaunting established norms and even sanctions, the United States and European Union have in recent years proclaimed their respective strategies to deal with BRI: the U.S. Indo-Pacific Strategy and the Asia-Europe Connectivity Strategy. The EU’s connectivity strategy emphasizes sustainable and international rules-based connectivity, and fostering bilateral, regional, and international partnerships that are “sustainable, open, inclusive, and rules-based.” The U.S. Indo-Pacific Strategy aims to create a “free and open” Indo-Pacific, borrowing the phrase from Japanese prime minister Shinzo Abe’s Indo-Pacific plan. As Secretary of State Mike Pompeo said, “We […] have never and will never seek domination in the Indo-Pacific, and we will oppose any country that does.” Viewing the vast expanse of the Indian and Pacific Oceans as an area of strategic importance to the United States, Washington wants to utilize a rising India as a regional balancer to Chinese expansionism and revisionism in the Indo-Pacific.

With its geographical connotation that elevates India’s position, the Indo-Pacific Strategy is seen by Beijing as part of a broader U.S. containment strategy against China’s rightful rise to power in its neighborhood.

The U.S. Indo-Pacific Strategy has created new tensions with the Chinese government. With its geographical connotation that elevates India’s position, the Indo-Pacific Strategy is seen by Beijing as part of a broader U.S. containment strategy against China’s rightful rise to power in its neighborhood. India’s challenge to China was underscored by the standoff between the Chinese and Indian militaries at the Doklam plateau in Bhutan in 2017. No longer diminishing the strategic challenge posed by India, Beijing soon came to realize that it had to improve relations with New Delhi to relieve Indian strategic pressure on China. In South Asia and the Indian Ocean region, CPEC has reinvigorated national ambitions in Pakistan, while conversely spurring competitive tendencies with India, which is wary of China’s expanding presence in Sri Lanka, Bangladesh, and the Maldives.

Chinese Activism in Afghanistan Motivated by Terror Concerns

Since the high-level Wuhan summit in April 2018 between Xi Jinping and Indian prime minister Narendra Modi, both sides have agreed to cooperate on Afghanistan’s economic development and to jointly train a small group of Afghan diplomats. Indeed, Sino-Indian cooperation in Afghanistan is one bright spot— and a potentially positive step to help improve governance, institutions, and security in Afghanistan—in the broader relationship marked by mutual strategic distrust. This joint step forward in Afghanistan, which took several years to realize, also shows China could work with India despite the Pakistan factor. Yet, China’s policy move seems to be motivated more by its domestic counter-terrorism agenda in Xinjiang vis-à-vis the Uyghur Muslim minority than by development goals for Afghanistan.

Sino-Indian cooperation in Afghanistan is one bright spot— and a potentially positive step to help improve governance, institutions, and security in Afghanistan—in the broader relationship marked by mutual strategic distrust.

In the past, China sought to assist Afghanistan’s economic development and supported the peace process between Kabul and the Taliban as means to stabilize the country—and it still does to a certain degree. However, due to Beijing’s limited influence in Afghanistan’s peace process and state-building, it became primarily motivated by internal concerns that extremist ideologies in Afghanistan would spill over into Xinjiang and encourage further terrorist attacks by the discontented Uyghur population. Contrary to this belief, China’s own repressive crackdowns on Uyghur human rights are the main drivers of Uyghur reprisals against the Chinese state—and not the oft-cited overseas influence from co-religionists in Afghanistan.

To move the Afghan peace process forward, U.S. and European officials have long wanted Beijing to use its leverage over Pakistan to pressure the Taliban to join peace talks with the Afghan government. Beijing, however, has been hesitant or unable to do so. The Chinese government insists it does not have that level of influence over Pakistan or the Afghan Taliban. Clearly, there are limits to what China is politically willing to do to help reduce tensions in regional conflict zones. The EU has a diminished role in reducing violence in Afghanistan or promoting peace between Pakistan and India, and thus wants China to play a more constructive role in the political settlements of these conflicts. But Beijing has a mixed record on such issues, particularly when its national interests do not correlate with the demands of the peace process.

The EU Caught between the U.S. and China

The U.S. Indo-Pacific Strategy also comes amid increased geopolitical competition between major powers. European governments are concerned about the implications of heightened U.S.-China tensions surrounding the ongoing bilateral trade and investment disputes, as well as strategic issues emanating from China’s increased assertiveness in the South and East China Seas, over Taiwan, and tensions over China’s handling of the North Korean nuclear issue. Any miscalculation could potentially lead to the outbreak of a regional conflagration.

While the EU shares some principal concerns outlined in the U.S. Indo-Pacific Strategy, it is keeping its distance so as to not attract Beijing’s ire. Although positions differ among European governments, the EU has not embraced the revitalization of the Quadrilateral Security Dialogue (“Quad”) in 2017 involving the United States, Japan, India, and Australia. Many European governments do not want to choose between their traditional ally, the United States, and China, their leading economic partner and major source of foreign investment. As Washington is on a gradual strategic retreat from global affairs, China could be a useful partner for European governments that also have to manage Russia’s spoiler role.

EU Competitiveness and Joining CPEC

Europeans’ reservations about China are igniting a Europe-wide debate about how to handle China’s expanding economic and political profile in the region. Many in Europe are anxious about Chinese investment practices and relative economic competitiveness vis-à-vis European companies. Chinese state companies investing in Europe seek access to technology from European companies, leading the EU to call for more stringent screening of foreign, namely Chinese, investment in the region. Until recently, foreign companies were required to form joint ventures with Chinese companies in order to gain market access in China. Additional government policies effectively force foreign investors to transfer technology to their joint venture partners, which significantly tilts the competition in China’s favor. Chinese state-owned enterprises also benefit from hefty financial support from state banks, leading the EU and the U.S. to decry Beijing’s violation of free market principles and fair competition. In April 2018, a group of 27 EU Ambassadors to China signed a report criticizing BRI, which it said “runs counter to the EU agenda for liberalizing trade and pushes the balance of power in favor of subsidized Chinese companies.”

Many in Europe are anxious about Chinese investment practices and relative economic competitiveness vis-à-vis European companies.

Far from dismissing BRI, European companies also want a share of the infrastructure and connectivity opportunities. The UK, German, and French governments and private companies have expressed interest in participating in the various energy, infrastructure, and technological projects under CPEC. In a visit to China, French president Emmanuel Macron told Xi Jinping that CPEC was good connectivity for the region. The French government emphasized it hopes that French companies will have “equal opportunity” to invest in Pakistan. The UK government released a statement that “the UK is poised to be a key partner of CPEC.” The larger question is whether CPEC can be extended to other countries given its political, economic, and strategic importance to both Beijing and Islamabad. The Chinese government has publicly said that it welcomes foreign participation and investment in CPEC, including from India, Iran, Russia, Saudi Arabia, the United States, and European countries, so as to create an image of inclusivity with benefits for all, though CPEC remains a China-Pakistan enterprise that is tightly controlled by these two governments.

As Pakistan prepares to approach the International Monetary Fund (IMF) for a financial bailout for its current account deficit and worsening financial situation, observers have raised questions about the financial viability of CPEC. As a result, Pakistani prime minister Imran Khan has sought financial aid packages from many countries, including Saudi Arabia, the United Arab Emirates, and China. European governments could provide Pakistan economic and other assistance and urge high governance standards for CPEC. Such external involvement could lead Pakistan and China in the long run to be more transparent and inclusive in the procurement process for CPEC projects.

The EU can leverage its reputable political neutrality, diplomatic activism in conflict mitigation, and engagement in regional institutions to complement the U.S. realist strategy and U.S-led security architecture in the Indo-Pacific.

The United States and European Union share common concerns about China’s global presence and possible dominance and thus should strengthen transatlantic cooperation and coordination to address a whole gamut of concerns arising from Chinese government’s foreign investments, China’s military assertiveness in East Asia, and its political interference in BRI countries. The EU can leverage its reputable political neutrality, diplomatic activism in conflict mitigation, and engagement in regional institutions to complement the U.S. realist strategy and U.S-led security architecture in the Indo-Pacific. The EU should develop strong partnerships in other regions to address China’s rise more broadly and the Belt and Road Initiative in particular. The EU needs to enhance cooperation not only with the Indo-Pacific region, but also Eurasian countries along the Belt and Road in order to steadfastly promote its high standards on sustainable economic development and good governance and to uphold the liberal international order.

This article is part of AGI’s project on “China, Germany, and the United States: The Strategic Triangle in the Transatlantic Relationship,” funded by the Fritz Thyssen Foundation.