China's Economic Plan to Rule Asia

"So long as China maintains its position as a key trading partner and source of large-scale investments...Beijing will maintain significant influence over its neighbors."

The past few months have been a strategic roll coaster for Asia. Earlier this year, China dealt a huge blow to the United States’ leadership in the region when it managed to enlist leading European economies as well as American allies in Asia as founding members of the Asia Infrastructure Investment Bank (AIIB), which will be headquartered in Beijing. Former Treasury Secretary Larry Summers went so far as claiming that the AIIB episode possibly marked “the moment the United States lost its role as the underwriter of the global economic system."

The Obama administration, which vigorously lobbied against the AIIB, was left isolated and bitter. It didn’t take long, however, before China similarly found itself isolated and bitter, when much of the region, including perennially neutral countries like Singapore, criticized—directly or indirectly—Beijing’s expansive construction activities in the South China Sea during the Shangri-La Dialogue. Recently, China announced that it is in the final stages of its massive reclamation project in the Spratly chain of islands.

More recently, however, the United States came under growing criticism for struggling to forge a coherent strategy on the Trans-Pacific Partnership (TPP) free trade agreement, as the Obama administration scrambled for legislative support to expedite the ongoing trade negotiations involving key Asian partners such as Japan, Vietnam, Malaysia and Singapore. This time, Singapore’s Foreign Minister K. Shanmugam warned, “American credibility will be seriously impacted if this [the TPP] doesn't go through," underscoring the repercussions of continued political squabbles over the TPP in Washington.

To drive home his point, Singapore’s top diplomat stressed the importance of trade to regional leadership in Asia: “In a sense the history of East Asia and the Asia-Pacific is being re-written through trade deals…Can you as a Pacific power, a world power, afford to not fully engage in this region?” The strategic lesson of the continuous back-and-forth hegemonic struggles between the United States and China is clear: Leadership in Asia is as much about serving as an anchor of stability—as Washington has sought to do for the past seven decades—as it is about undergirding the regional economic order by providing trade and investment incentives, as China has been efficiently doing for the past decade or so.

If the United States wants to remain as the undisputed regional leader, which is essentially the logic behind the Pivot to Asia (P2A) policy, it will have to not only deter further Chinese provocations in adjacent waters, particularly in the South China Sea, but also enhance its economic footprint in Asia in ways that are consistent with the developmental imperatives of the regional states.

The Chinese Juggernaut

There is this long tradition—particularly among Sinologists—of discussing China’s craftiness and strategic nimbleness in contrast to (supposed) American/Western naiveté and strategic lethargy. In many ways, Pillsbury’s The Hundred-Year Marathon is the latest permutation of an age-old school of thought, which portrays China as a highly calculating power blessed with ancient wisdom and extremely sophisticated long-term strategic planning that is designed to recreate the Middle Kingdom at the expense of a declining West.

A closer look at China’s conduct in adjacent waters, particularly in the South China Sea, however, evinces Beijing’s increasingly reckless and self-defeating conduct in its immediate neighborhood. Xi Jinping’s “Peripheral Diplomacy” is precisely a response to the growing recognition that Beijing has terribly mishandled its relations with neighboring countries, gradually inspiring a counter-alliance that is ostensibly led by the United States and invigorated by the re-emergence of Japan. Last year, after an almost decade-long hiatus, Xi assembled the Chinese Communist Party’s Foreign Affairs Leading Group to discuss possible measures to avoid a full estrangement with maritime neighbors.