Monday, December 22, 2014

Following Silk Roads to a Consolidated Asia: Chinese New Diplomatic Strategy

Wayne Chen

      Against the ''APEC Blue'' appeared surprisingly in the clear Beijing sky during the APEC Leaders' Week, by hosting APEC 2014, China demonstrated its rising leadership in the Asia-Pacific and determined actions in consolidating partnership in the neighborhood. From the First Island Chain to the west, China is rapidly transforming into a geopolitical big power dramatically following its ''One Belt, One Road'' strategy, which is continuously advanced by a series of infrastructure investment in developing countries. In an APEC context, China is strengthening regional cooperation from the Pacific Ocean to the Baltic Sea by improving cooperation on physical connectivity among neighbor states. Through the set-up of a network of transportation that connects Eastern, Western and Southern Asia, China is emerging in the center of the continent which plays as a new economic engine.

One Belt, One Road as a Two-Way Blueprint

       One Belt, One Road, the ambitious strategy was revealed for the first time during Xin Jinping's visit in Indonesia before the APEC Leaders' Week in 2013 where he called for the establishment of a new maritime silk road between China and Southeast Asian neighbors, particularly the 10 member Following Silk Roads to a Consolidated Asia: Chinese New Diplomatic Strategy Wayne.Chen states of the Association of Southeast Asian Nations. Xi also proposed to establish the Asian Infrastructure Investment Bank (AIIB) to accelerate the realization of the One Belt, One Road strategy. Borrowing the ancient commercial route: the 21st century maritime silk road (the One Road), through which ancient Chinese merchants transported silk and commodities from other countries, China emphasized the significance of Southeast Asian states as hubs and partners to Chinese economic development and diplomatic policy. While the One Road strategy is strengthening the tie with ASEAN, South Asian and African countries through the sea, the land-based New Silk Road Economic Belt (the One Belt), starts from central China and goes through Central Asia, Iran, Turkey before reaching Moscow and Rotterdam in Europe, aims to engage with neighbor states on the continents.

       At current stage in promoting the One Belt, One Road diplomacy policy, China is working intensively in a wide range of regional and international arenas, namely the APEC, ASEAN++, and Shanghai Cooperation organization (SCO), while the former two involves members in the Road and the later includes economies in the Belt. A series of consolidation started in August when Xi paid a state visit to Mongolia that shares a long border with China and depends greatly on natural resources exports, especially coal and copper. After Xi's visit, 24 Memoranda of Understanding and Agreements were signed and ties between the two countries were upgraded to a comprehensive strategic partnership. These agreements facilitate transport across the Mongolian-Chinese border; increase access to 6 sea ports, including Tianjin, Dalian, and Jinzhou, in China for Mongolian exports, and; provides potential access to Chinese financing, specifically for mineral resource and infrastructure development in Mongolia.

      Soon after in September, Xi attended the 14th Council of Heads of State of SCO in Dushanbe, followed by state visits to Tajikistan, Maldives, Sri Lanka and India. Xi's 9-day trip drove two ''wheels'' of security and economy simultaneously for the development or relations with Eurasian countries, and extended invitation to member states for their active participation in the joint construction of the Silk Road Economic Belt as well as the establishment of an SCO development fund and an SCO development bank.

Fuelling Infrastructure Development with Financial Resources

       A remarkable leap was made on 24th October when 21 Asian countries, including Bangladesh, Brunei, Cambodia, China, India, Kazakhstan, Kuwait, Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, the Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam, signed the Memorandum of Understanding on Establishing AIIB. The Memorandum of Understanding specifies that the authorized capital of AIIB is 100 billion U.S. dollars and the initial subscribed capital is expected to be around 50 billion dollars. Beijing will be the host city for AIIB's headquarters and AIIB will be formally established by the end of 2015.

       AIIB functions as a new inter-governmental regional development institute in Asia and thus could be considered as an alternative to the Bretton Woods institutions, the World Bank and the International Monetary Fund, and the Asian Development Bank which is current premier institute on infrastructure development in the East Asia. Nevertheless, AIIB has won China great support of neighbor states. 8th November, 3 days before the APEC Economic Leaders Meeting, China hosted the Dialogue on Strengthening Connectivity Partnership joined by heads of Bangladesh, Cambodia, Laos, Mongolia, Myanmar, Pakistan and Tajikistan, along with representatives of the United Nations Economic and Social Commission for Asia and the Pacific and the SCO. At the Dialogue, Xi announced the creation of the Silk Road Fund and that China would contribute US$40 million as the first input. The fund is expected to scale up to $40 billion for financing construction of infrastructure across Asia linking China with three continents over land and sea, with railroads, pipelines and roadways.

       On the other hand, the Marine Silk Road Bank was also created and would have a minimum in paid-in capital of 5 billion yuan ($816.23 million) funded by the Marine Silk Road Investment Management Fund and ASEAN member countries.

Skepticism and Resistance

       Facing the rapid progress of infrastructure investment along the One Belt, One Road the international community has responded in both appreciation and concern. Some believe the economic belts demonstrates a win-win approach by simply building a transportation corridor, wrapping up economic aid programs in achieving China's goals, and every participant states will benefit from it. Others are cautious that China will use its economic strength to change the geopolitical power situation in Eurasia. Moscow, for example, is watching and at the same time cooperating with China closely considering that the China-led Silk Road may divert the momentum needed by the multi-billion-dollar infrastructure projects in Siberia, including a $47 billion upgrade of the Trans-Siberian Railway and the Baikal-Amur route, and creating a northern sea route over the Arctic. Meanwhile, the United States probably represents the strongest opposition viewing the One Belt, One Road is consolidating allies and foes behind the First Island Chains and can be competitive if not rivalry at all to the ''Rebalancing Asia'' strategy led by the US.

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