Chinese Association for International Understanding

I had an opportunity to visit China, particularly Beijing and Eastern coastal cities of Quanzhou and Xiamen in the special economic zone in Fujian Province at the invitation of the Chinese Association for International Understanding (CAFIU) during Oct. 25-Nov. 5, 2014. I led the delegation from Nepal and the Philippines.

Meetings and interactions with think tank groups like CAFIU and its partners, leaders of the Communist Party, local government agencies, non-governmental agencies and community organizations at large were particularly fruitful in understanding and witnessing first-hand China’s social, cultural, political, economic development and environmental conditions. In particular, China’s economic development, as a global leader, in recent years is exemplary and presents examples of some of the best practices for holistic development.

We also had some insights into important reforms/efforts taking place at political, government, public and community institutions in curbing corruption, mitigating environmental problems, reducing widening gaps in development between the regions (eastern and western) and transfer of technology and innovations. I had a quick glimpse of China’s economic rise in recent years. It was a great learning and sharing experience for me. I am confident China is on the right track of persuing its goal of becoming a global leader where its people are prosperous, peaceful and cooperating with rest of the world particularly the neighborhood.

My views expressed here are based on review of different study reports, interviews and speeches of Chinese political leaders, and my first-hand observation from this quick China visit.

A new era is dawning in Chinese foreign policy as the country’s economic growth enables it to move from past timorousness in declaring itself a global leader and a relative inability to defend its interests, to one in which Beijing can seek adjustments in the security environment it has faced for the last sixty years.

China is close to meeting all the measures of what defines a global great power: political, economic, and military might with a global reach. But it still does not appear to act like a great power in terms of its contribution to international leadership during conflict situations such as in Ukraine. Instead we repeatedly see Beijing being assertive only when it comes to defending its own interests.

Yet it has pledged to deepen friendly relations with the neighbors, actively participate in cooperation mechanisms, and deepen regional cooperation in creating an environment of peace, stability, equality, mutual trust, cooperation and benefit.

Comrade Xi Jinping (2013) underscores the need to adopt the right approach to upholding justice and seeking interests in growing relations with these countries. He emphasizes that as a guiding principle, China should uphold justice and fairness politically and must pursue mutual benefits and common development economically. In promoting relations with neighbors and other developing countries that have long been friendly towards China but face daunting challenges in development, it will accommodate their interests rather than seeking benefits at their expense or shifting troubles on to them.

China’s economic model requires new markets and privileged access to resources and this will be a moderating factor in their foreign policy approach. For example, Beijing can’t afford to offend its neighbor Russia for a complex range of reasons, ranging from internal and external security and access to new sources of energy supply.

The competitive and contentious external environment China faces in its immediate neighborhood requires Beijing to take a relatively cautious and tactful national security approach in the short to medium term. At the same time it is strengthening its external environment, especially on the periphery, whenever it can.

Economic diplomacy is a central aspect of new Chinese foreign policy. During its remarkable economic rise, it has used economic diplomacy primarily through trade, and the use of carrots as a means to accumulate or attract soft power. This was a part of the broader strategy formulated by think tanks in the PRC during the 1990s as a new security concept.

Recently, China has changed its strategic doctrine and begun to use economic diplomacy as a coercive tool (Glaser, Bonnie, 2012). After ten years or so of a policy based primarily on economic carrots, China has begun to show a willingness to use economic diplomacy for coercive means as evidenced by events in South China Sea. Recent history shows that as China grows more confident, we will see it gradually move away from an economic diplomacy policy of carrots, to sticks.

On the economic front, China has introduced a plethora of new bilateral and multilateral initiatives, particularly in its immediate neighborhood. The most ambitious projects are the Silk Road Economic Belt and the corresponding Maritime Silk Road each of which includes smaller pieces such as the China-Pakistan economic corridor and the Bangladesh-

China-India-Myanmar (BCIM) economic corridor. China has also been active in pursuing free trade agreements with its neighbors, including Australia, South Korea, and India.

As the largest and most prosperous developing nation, China often sees itself as the leader of the developing world—meaning more input from developing countries would likely translate to more Chinese leadership on the international stage. Accordingly, the three requirements for Chinese diplomacy are “confidence,” “backbone,” and “generosity.” Each of these concepts is tied up with confidence and pride in China’s power. It will never bully smaller countries; yet will never accept unreasonable demands from smaller countries (Xi Jinping, 2013).

China will be more active in playing the role of a responsible, big country especially on the international stage. Specifically, Wang (2014) mentioned that China “will advance and protect the legitimate rights and interests of developing countries and make the international order more just and reasonable.” Xi emphasized that the basic tenet of diplomacy with neighbors is to treat them as friends and partners, to make them safe and help them develop. He also emphasized that China should expand regional financial cooperation by establishing an Asian Investment Bank for Infrastructure and improving the regional financial safety net (Wang, 2014).

He also called for public diplomacy and people-to-people exchange between China and neighbors for a long-term development of relationships. Such exchange should involve tourism, technology, education and sub-regional cooperation.

Bearing in mind both the domestic and international interests of the country and maintaining the continuity and consistency of its major diplomatic policies, it has promoted innovations in diplomatic theory and practice. They include efforts at actively promoting relations with the major countries such as Russia, the USA and European Union. With Russia it strengthened bilateral cooperation in the economy, trade, energy and strategic security and consolidated the basis of the China-Russia comprehensive strategic partnership of coordination.

With the US, it agreed to work together to build a new model of major-country relationship based on mutual respect and win-win cooperation, thus charting the course and drawing the blueprint for growing China-US relations in the future based on principles of non-conflict and non-confrontation.

With other European leaders, China has worked steadily to open up new areas of mutually-beneficial and pragmatic cooperation between China and Europe. China’s relations with its neighbors such as Vietnam, ROK, Pakistan, are, on the whole, moving towards a more favorable direction. It has been able to consolidate good-neighborly friendship and cooperation with them through dialogue and negotiation.

Comrade Xi Jinping’s successful visits to Africa and Latin America have fully reflected the great importance China attaches to developing countries. It has enhanced China’s political trust and results-oriented cooperation with them and brought China’s overall cooperation with Latin America and the Caribbean to a new height.

China is committed to helping other countries, developing countries and neighboring countries in particular, with their development while achieving development of its own. Hence China’s basic tenet of diplomacy with neighbors is to treat them as friends and partners, to make them feel safe and to help in their development. It calls for more public diplomacy and people-to-people exchange between China and its neighbors to the region. It adopts multilateral diplomacy through its commitment to the advocacy and practice of multilateralism. It places great value to the important role of the United Nations and other international organizations.

China is pushing ahead with win-win economic diplomacy that aims to boost domestic prosperity as well as share opportunities with the rest of the world. It strongly believes that any country should accommodate the legitimate concerns of others when pursuing its own interests and should promote common development of all countries when advancing its own development.

As the first pillar of its new economic diplomacy, it highlights trade, investment, infrastructure and finance with high-level support. The second pillar of China’s economic diplomacy is a win-win cooperation, which guarantees two-way benefits for China and the rest of the world.

The world needs China’s development experience, technology and capital. In particular, China’s vast foreign reserves could be a rare source of financing for infrastructure projects in many developing countries and emerging markets amid towering debt situations in many rich countries.

China also needs the world to expand its markets and investment destinations. The “go global” initiative would boost economic growth and add jobs back in China. It would also help ease overcapacity in some industries and upgrade China’s economic structure.

Along with the “go global” strategy, China’s economic diplomacy also emphasizes a “bring in” policy to make better use of advanced foreign technology and quality products in order to improve the national economy and people’s lives.

The third pillar for China’s economic diplomacy is to tap the full potential of the market. To this end it considers enterprises as the starting point and the main participant in China’s economic diplomacy. Against the background of economic globalization, China’s new leadership has pledged that its diplomacy will serve the national economy through more exports, outward investment and jobs. China’s growth will make the country, now the world’s second largest economy, and a closer partner to other countries. Its economic diplomacy is essentially a process of creating win-win prosperity with the rest of the world.

Among China’s economic diplomacy agenda items next year, priorities will be given to the development of a Silk Road Economic Belt and the 21st-Century Maritime Silk Road, bilateral and multilateral free trade zones, and a greater say in establishing standards.

Yan Xuetong (Jayadeva, 2014) suggests that with the “New Silk Road” with Central Asia, the“Maritime Silk Road with South East Asia and the economic corridor through India, Myanmar, and Bangladesh, countries in these regions can expect considerably increased willingness by China to underwrite substantive economic, security, and other benefits in exchange for political support for China’s regional objectives.

Under these scenario, further efforts will be made for better political and economic relations with neighboring countries, for closer security cooperation and people-to-people contact.

Closeness, earnestness, mutual benefits and inclusiveness are identified as the four basic principles of ‘peripheral diplomacy’. China envisions a trade network where “goods are abundant and trade is more high-end.” Beijing expects the economic contact along the Silk Roads to boost productivity in each country. As part of this vision, China has repeatedly stressed its economic compatibility with many of the countries along the planned route, and offered technological assistance to countries in key industries.

China’s unique development model and advocacy of political values, patterns of social development and foreign policies would have a growing influence on the international community.

Nepal China relation has always remained very friendly and based on mutual trust and unconditional cooperation. With neighborhood-first policy adopted by the new leadership in Beijing, economic cooperation with Nepal is growing even stronger as evidenced by the United Front Work Department (UFWD)’s growing profile in Nepal and direct involvement in Lumbini, Lord Buddha’s birth-place.

Beijing has decided to revise upward the quantum of foreign assistance to developing countries in its neighborhood and that Nepal and Pakistan will particularly be beneficiaries of this. He said development of the ‘New Silk Road Economic Belt’ would benefit Nepal. Talks are separately underway for extending the 1200 kilometer Qinghai-Lhasa-Shigatse railway to Kathmandu, as agreed to by Chinese Premier Wen Jiabao during his unannounced visit to Nepal in 2012. Once completed, it will alter the geostrategic balance in the

Recent statement by the Finance Minister of Nepal that “We see China’s state and private capital as sources of Nepal’s development particularly in infrastructure, social entrepreneurship, tourism, agro-based industries and hydropower” endorses this. This is also further substantiated by the statement of the Chinese Ambassador to Nepal Wu Chuntai that China’s new leadership has accorded high priority to relations with Nepal and sought a win-win policy with Nepal.

Ambassador Wu also called on Nepal to join the China-initiated Economic Belt and 21st-Century Silk Road. The new Chinese leadership, particularly President Xi Jinping, has proposed to build an economic belt along the ancient Silk Road that brings Asia and Europe together and the Maritime Silk Road to connect with neighbors in South East and ultimately to South Asia to boost common development.

The Vice Foreign Minister and the Head of Delegation of China at the 18th SAARC Summit in Kathmandu confirmed that China will seek deeper ties with South Asia, especially on the economic front (Tiezzi, 2014). According to him, “China has put forward a series of initiatives that include increasing trade between South Asia and China to 150 billion U.S. dollars and investment to 30 billion U.S. dollars in the next five years”. The $30 billion will go for road construction, Liu further said. China’s offer of increased trade and infrastructure development is an off-shoot of the Silk Road Economic Belt, China’s plan for an integrated trading network that will stretch from western China to Central Asia, South Asia, the Middle East, and Europe.

Many of the SAARC members (including Afghanistan, Pakistan, Maldives and Sri Lanka) have already expressed interest in joining either the Silk Road Economic Belt or its oceanic equivalent, the Maritime Silk Road. In addition, Bangladesh, India, Nepal, Pakistan and Sri Lanka have joined China’s Asian Infrastructure Investment Bank, which is expected to act as a major source of funding for Silk Road infrastructure projects along with proposed BRICS Development Bank.

India is especially wary of increased Chinese influence over its near neighbors. In part, as a response to increased Chinese attention to the region, Indian Prime Minister Narendra Modi has made a special effort of reaching out to the South Asian nations (Diplomat, 2014). This regional outreach includes a new vision for SAARC, a point Modi made clear from the very beginning of his term by inviting all the SAARC leaders to his swearing-in ceremony in May 2014.

Given this, India will look askance at China’s own goals for SAARC, which tie so neatly into China’s larger foreign policy vision for the entire Eurasian continent, a vision that puts China bank at the center of the world. On their face, China and India share common goals for SAARC: increasing regional integration, through infrastructure connections and increased economic ties. The issue, of course, is that both India and China ultimately want to be at the center of this regional integration process.

Unfortunately for India, many of the other SAARC members are eager to accept the benefits that come from buying in to China’s projects. With SAARC remaining fractured due to ongoing India-Pakistan tensions, it may have trouble implementing its own strategy of turning SAARC into a unified trading and diplomatic bloc. Meanwhile, China’s own plan works just as well on an individual, bilateral basis, a strategy China has already been successfully pursuing with investment deals in Sri Lanka, the Maldives, and Afghanistan.

China’s emergence as the “Factory of the World” based on its focus on exporting labor-intensive manufactures is well-known. Less known is the role that infrastructure played in this strategy. In the short run, infrastructure development boosts investment and economic growth. In the longer run, quality infrastructure boosts productivity of a country and enhances the competitiveness of its exports. China spent 8.5 percent of its GDP on infrastructure between 1992 and 2007, well over the developing country norm of 2-4 percent.

China’s push for infrastructure development within its borders picked up pace with the “Go West” policy implemented in 2000. Prior to this policy, China’s development was confined to the eastern coastal region of the country. Its success in attracting investment into the coastal special economic zones made China the fastest growing country in the world. But it also led to widening economic disparity between the coastal region and the rest of the country, especially the inner western part. The “Go West” policy sought to address this disparity by building basic infrastructure towards the country’s hinderland and by attracting investment in the western region.

Last year, China came up with the New Silk Roads policies to enhance connectivity with neighboring countries. These policies have a number of components. First, Xi Jinping, the President of China, made a call for a Silk Road Economic Belt with Central Asia. Second, a 21st -Century Maritime Silk Road is also to be developed to connect China with ASEAN countries initially and ultimately with South Asia as well. Third, projects under the “Belt and Road” policy are to be financed, among others, by the New Development Bank set up by the BRICS and the recently established Asian Infrastructure Investment Bank, both financed mainly by China.

China’s actions have led to the revival of the Northern Silk Road. Cities in inner provinces, such as Kunming, Chongqing, Chengdu, Xi’an and Xining have emerged as major metropolitan cities with urban infrastructure projects paralleling those in the coastal areas.

Together with India which is actively implementing its “Look East” policies, China is building the BCIM Economic Corridor to connect Yunnan Province of China with Myanmar, Bangladesh and India. This is an important segment of the less known Southern Silk Road of the bygone era.

Nepal should now seek to enhance the country’s role as a land-bridge between India and China by proposing Trans-Himalayan Economic Corridors especially when China and India and countries in the SAARC are willing for grater connectivity in the region. These corridors would lead to a win-win situation for the countries concerned, especially Nepal, which is a land-lock country and has the potential to be a land bridge between India and China since distance between Indian cities and the inner cities of China would be greatly reduced if the land route through Nepal is used.

India under Prime Minister Modi is pursuing a similar approach in its foreign policy of economic cooperation in the neighborhood, the region and beyond. The fact that China and India are among the fastest growing trading partners and largest economies in the world and the region, Nepal can benefit tremendously by taking advantage of the situation and exploring economic diplomacy based on its comparative and competitive advantages, as the core of its foreign policy.

In June this year, the Chinese Ambassador in New Delhi, Wei Wei, proposed a China and India Trans-Himalaya Economic Growth Region (THEGR) so that the two countries could interconnect and prosper. This proposal is a welcome as it addresses an important missing link in attempts to promote the old Silk Roads.

Economic corridors between India and China through Nepal would be one component of the recent Chinese proposal on Trans-Himalaya Economic Growth Region (THEGR) since the extension of the Beijing-Lhasa railway to Shigaste, a Chinese city close to the Nepal border, would open soon.

The proposed THEGR offers a big opportunity for Nepal to benefit from being the land-linked state between the two Asian giants. It must look forward to benefitting from PM Modi’s “neighbor first” diplomacy and China’s push for connectivity in the neighborhood by proposing further studies on the Trans-Himalayan Economic Corridors. Mistrust of the past and complaints about old deals will not get the country far. A new beginning based on national interest must be made (Rana, 2014).