If Not the Chinese Belt-and-Road, Then What? Navigating A Multitude of Visions for the Indo-Pacific and Beyond
China Fellow; Program Officer, Geoeconomics
Yixiang Xu is the China Fellow and Program Officer, Geoeconomics at AGI, leading the Institute’s work on U.S. and German relations with China. He has written extensively on Sino-EU and Sino-German relations, transatlantic cooperation on China policy, Sino-U.S. great power competition, China's Belt-and-Road Initiative and its implications for Germany and the U.S., Chinese engagement in Central and Eastern Europe, foreign investment screening, EU and U.S. strategies for global infrastructure investment, 5G supply chain and infrastructure security, and the future of Artificial Intelligence. His written contributions have been published by institutes including The Chinese Academy of Social Sciences, The United States Institute of Peace, and The Asia Society's Center for U.S.-China Relations. He has spoken on China's role in transatlantic relations at various seminars and international conferences in China, Germany, and the U.S.
Mr. Xu received his MA in International Political Economy from The Josef Korbel School of International Studies at The University of Denver and his BA in Linguistics and Classics from The University of Pittsburgh. He is an alumnus of the Bucerius Summer School on Global Governance, the Global Bridges European-American Young Leaders Conference, and the Brussels Forum's Young Professionals Summit. Mr. Xu also studied in China, Germany, Israel, Italy, and the UK and speaks Mandarin Chinese, German, and Russian.
At the 2019 Raisina Dialogue in New Delhi last week, policy elites from the United States, Europe, and Asia rehearsed and debated the prospect of countering the Chinese Belt-and-Road Initiative (BRI) in the Indo-Pacific and beyond. Beijing’s ability to formulate the best articulated regional trade and development strategy and commit large sums of loans and aids to realize its vision has rattled the West and its allies for some time now. Initially supported by developing as well as developed countries along its planned routes, the ambitiously-named initiative is increasingly regarded as China’s grand plan for strategic competition with the West from the Pacific to the Atlantic. While it’s clear that getting in on the action or shaping the process from the inside, as many European countries had hoped, is close to impossible, the discussions shifted to resisting Beijing’s agenda.
The BRI promised to build physical and economic connectivity—in the form of infrastructure, trade, and investment—through much of the Eurasia region. The prospect of accelerated economic growth with easy and generous Chinese financing is immensely attractive to many developing countries. For a while, all the West could do was sit on the sideline and watch Chinese infrastructure projects and acquisitions mushroom across Asia, Africa, and into Europe. Many European countries still hoped to court Chinese investment and touted the strength of Europe’s open market economy as well as its cutting-edge technologies on offer. But as Chinese economic offensives spread and inched closer to Europe’s home turf, alarm bells went off around European capitals. The sale of the German robotics company KUKA marked a turning point in Berlin’s position on Chinese investment. The transfer of the Hambantota port in Sri Lanka to China, giving Beijing a strategic foothold along a critical commercial and military waterway in the Indian Ocean, whipped up a hysteria against the China threat within the global security establishment. The West has come to the consensus that the Chinese BRI needs to be resisted. But what should replace it? Whose strategic vision can compete with Beijing’s determination to set the regional agenda?
The U.S. Indo-Pacific Strategy Sets Up Regional Confrontation with China
Originally authored by Japanese prime minister Shinzo Abe, the U.S. Free and Open Indo-Pacific Strategy aims to counter China’s BRI and shape the region’s economic and security order. The Trump administration initially committed $113.5 million in immediate funding to foster new strategic initiatives in the Indo-Pacific, focusing on four main aspects: “enhancing United States private investment in the region, improving digital connectivity and cybersecurity, promoting sustainable infrastructure development, strengthening energy security and access.” On the security front, the strategy envisions cooperation with a range of allies in the Indo-Pacific, specifically the “Quad,” a partnership between Australia, India, Japan, and the United States, to ensure maritime freedom of navigation and to tame China’s territorial and maritime revisionism in the South China Sea.
U.S. vice president Mike Pence highlighted some legitimate concerns with the BRI at last November’s APEC Summit in Papua New Guinea, citing Beijing’s generous infrastructure loans to developing countries in the region, often resulting in white elephant projects that profit Chinese contractors and saddle local governments with staggering debt. It also made plain obvious the strategic rivalry between China and the U.S., as the vice president mocked the BRI as a “constricting belt” and a “one-way belt.”
It is unclear whether the new U.S. strategy could deliver its objectives better than the Obama administration’s “pivot” to Asia.
It is unclear whether the new U.S. strategy could deliver its objectives better than the Obama administration’s “pivot” to Asia. Many U.S. allies and regional partners do not want to choose sides and are thus unable to fully embrace Washington’s anti-China project with limited economic vision and inclusivity. Key regional partners such as ASEAN announced that they are interested in consultation or partial involvement in the U.S. strategy but will ultimately chart their own courses.
As Washington gears up to challenge the BRI, it should note one important lesson from Beijing’s exercise. A highly centralized, top-down strategy could easily marginalize partners and lead to accusations and resentment. A truly free and open Indo-Pacific strategy needs to be based on the free consensus and open participation of all partners in the region. However, a transactional and highly unpredictable President Trump brings calls into doubt the U.S.’ reliability as a strategic ally. At the moment, Washington is too deeply embroiled in the trade war with Beijing to offer a good alternative for regional infrastructure development. Nor is the U.S. willing to commit resources to match China’s offer. U.S. freedom of navigation operations in the South China Sea do little to deter China or reassure America’s allies in the region.
India, Japan, and Australia: Reconciling Multiple Visions for the Indo-Pacific
Finding a way to compete with the BRI is not a solo exercise in Washington. U.S. allies in the Indo-Pacific region are offering their takes on what an open and free Indo-Pacific should look like based on both a shared determination to halt Chinese influence and their respective national interests.
India’s anchor position in the Indian Ocean makes it both a key component of any regional strategy and a major player in shaping the Indo-Pacific regional order through its own policies. Its Act East Policy “aims to strengthen ties with the Association of Southeast Asian Nations (ASEAN), through new projects that will provide India’s landlocked northeast with better access to southern ports and connect India to Thailand via Myanmar.”
The India-China standoff at the Doklam Plateau in 2017 illustrated that the strategic confrontation between the two countries persists. To Delhi, the China-Pakistan Economic corridor, the Kyaukpyu Port in Myanmar, and the Hambantota port in Sri Lanka are examples of Beijing’s design to dominate its backyard. The “2+2” India-U.S. dialogue saw the beginning of a closer bilateral relationship between the two countries. With the signing of the Communications Compatibility and Security Agreement (COMCASA), the two countries aim to “facilitate access to advanced defense systems and enable India to optimally utilize its existing U.S.-origin platforms.” India is moving toward serving as a major maritime power counterbalancing China in the Indian Ocean. However, although India enjoys being part of a larger strategic vision, it is not prepared to substantively link its own strategic arena with the much larger Asia-Pacific. Prime minister Narendra Modi seeks continued engagement with China, shying away from mentioning of the Quad and emphasizing a strong and stable bilateral relationship at last year’s Shangri-La dialogue in Singapore.
Although India enjoys being part of a larger strategic vision, it is not prepared to substantively link its own strategic arena with the much larger Asia-Pacific.
Japan supports its own free and open Indo-Pacific that “benefits from a regional order that is based on rule-of-law, transparency, openness, high-quality rules for trade, investment and infrastructure and the prevention of coercive actions against smaller states.” At the center of Tokyo’s strategy lies ASEAN, which has been a major theater of Sino-Japanese rivalry in recent years. Even there, Japan is reluctant to position its strategy as a means of containing China and instead emphasized that Japan’s strategy would be inclusive.
Australia, too, wishes for a stable and peaceful Indo-Pacific by “building a more capable, agile and potent Australian Defense Force.” Furthermore, the government’s Foreign Affairs White Paper released in 2017 highlights the U.S.-Australia alliance and emphasizes how central the U.S. is to the interests of Australia, encouraging more economic and security engagement with the United States. But the same White Paper talks about fostering economic growth in the Indo-Pacific region in the context of “changing power balances.” China is Australia’s top trade partner. How Canberra will marry its economic and security objectives remains unclear.
The EU Turns Against BRI, but Brussels Needs to Put Up a Better Offer
At first, the BRI, which was named One-Belt-One-Road until 2017, gathered much enthusiasm in Europe: China would pay for new infrastructure construction that links regions across the Eurasia continent. European companies were eager to bid for Chinese-financed construction projects and reap the benefit of opening up distant markets as well as more efficient freight transport. The twelve-day rail freight travel time from Chongqing in China to Duisburg in Germany is a perfect advertisement for hopping on the BRI train. European capitals openly courted Chinese investment, especially in the east and the south.
It didn’t take long before Europe’s enthusiasm turned sour. European companies are routinely excluded from BRI infrastructure projects. Chinese investments in Western Europe clearly focused on strategic infrastructure, assets, and cutting-edge technologies. Not only has China profited from participating in the EU’s open market economy, but Beijing still refuses to grant European companies reciprocity in the Chinese market. The sale of the German robotics company KUKA marked a turning point in Berlin’s position toward Chinese investment. After tightening investment screening regulations in Germany, Berlin spearheaded the process that led to the adoption of an EU framework for foreign direct investment screening. The influential Federation of German Industries (BDI) released its policy paper on China in January 2019, advocating more effective industrial policies from the EU and closer cooperation with its partners in an era of “systemic competition” from China.
Not only has China profited from participating in the EU’s open market economy, but Beijing still refuses to grant European companies reciprocity in the Chinese market.
Brussels is also increasingly frustrated by Beijing’s efforts to engage member states separately, creating divisions within the EU. The 16+1 format gives China a platform to court Central and Eastern European countries independent of EU cohesion. In July 2018, Hungary declined to sign a document supported by the other 27 EU ambassadors in Beijing, denouncing the BRI for hampering free trade and giving advantage to Chinese companies. BRI has not only brought competition to the EU, but also challenges the bloc’s ability to form a united and effective response.
The EU response, when it finally arrived in the form of the EU-Asia Connectivity Strategy, ignores China’s BRI and instead lays out the EU preference for dealing with partners in both its immediate neighborhood to the east and countries further afield in Asia through bilateral and regional projects. The strategy’s emphasis on technical training, institutional facilitation, and standard setting avoids the basic demands from these developing countries to create more economic opportunities through infrastructure development and manufacturing on the ground, which the BRI vowed to deliver. Moreover, Brussels’ suggestion that the EU is the ideal model for developing connectivity across the region underscores the bloc’s confusion over its strategic objectives. The EU experience is based on continuing political integration, which is not what most of its partners are looking for.
China Watches, Unrattled
Since taking the helm of the country, Chinese president Xi Jinping opted for a much more active foreign policy. “Hide your strength, bide your time, never take the lead” from Deng Xiaoping’s era no longer satisfies Beijing’s desire to project China’s power in the Indo-Pacific region. The ongoing China-U.S. trade war and ramped-up rhetoric from the U.S. and its allies against spreading Chinese influence through BRI has further convinced the party leadership of the West’s effort to contain China’s rise. One of the biggest beneficiaries of the rule-based international order in the past four decades, China is not going to abandon the language of multilateral rules and norms, but it has learned to adapt that argument to suit its regional vision. The Trump administration’s nationalist and often unilateral policies boosted Beijing’s claim that China—instead of the U.S.—could provide a more stable and inclusive regional leadership.
One of the biggest beneficiaries of the rule-based international order in the past four decades, China is not going to abandon the language of multilateral rules and norms, but it has learned to adapt that argument to suit its regional vision.
At the APEC Summit on November 17, 2018, President Xi highlighted some of the Indo-Pacific strategy goals as its own; he emphasized that “we must strengthen rules-based global governance if we are to achieve stability and development. Rules should be formulated by the international community, not in a might-is-right way. Once the rules are made, they should not be followed or bent as one sees fit, and they should not be applied with double standards for selfish agendas.” It was intended as a snub to Washington’s claim that China is the rule breaker and the U.S. the designated protector of global order.
For Beijing, the multitude of regional visions from the U.S. and its allies is not an immediate cause for concern. Parallel objectives in these strategies are only effective if they are well coordinated. Even then, it is not clear how much resources respective partners are willing to commit to create the infrastructure connectivity and economic opportunities that provide tangible benefits to regional partners they seek to court. The newly minted trilateral Partners Infrastructure Fund, supported by the U.S., Japan, and Australia, offered modest pledges for infrastructure development in the region dwarfed by the $360 billion in loans from the China Development Bank for BRI projects alone. It is also uncertain whether Western government spending to compete with the Chinese offer would entice more of their private companies to invest in the region, a crucial factor to the allies’ vision of multiplying investment to build closer economic connectivity between the investment recipients and the Western economies. Some economies, like Japan and Australia, rely heavily on their trade and investment relationship with China and are not willing or able to confront BRI head-on. “To guarantee victory in battles, one should know oneself and one’s opponents,” says a Chinese proverb. And Beijing understands the current limit of its strategic opponents.
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.