China’s Economic Gifts as Extension of its Foreign Policy
By Wen Xin Lim

China’s Economic Gifts as Extension of its Foreign Policy

Nov. 08, 2016  |     |  0 comments


China’s outbound investment has skyrocketed in recent years with its growing economic and political prowess. In 2015, China overtook Japan to become the world’s second largest cross-border investor after the US, investing a record USD 145 billion abroad. That was 18.3 percent more than in the previous year.


China as a “regional bank” is not constrained geographically to Asia. Africa, Latin America, and Europe have also seen China’s rising influence in the economic dimension.


In December 2015, Chinese president Xi Jinping offered a whopping $60 billion loan and aid package to Africa, according to Voice of America. Just this month, “Zambia signed a deal for the construction of a new railway project with China’s state-run firm that will enhance transportation in the southern African nation … China Civil Engineering Construction Company will run a 388-kilometer railway from the eastern town of Chipata to the central town of Serenje via another eastern town of Petauke at a cost of USD 2.3 billion within a four-year period in Zambia,” reported China Daily.


In Latin America, “China’s two development banks, the China Development Bank and the Export-Import Bank of China, provided upwards of USD 29 billion to Latin American governments in 2015”, an amount that is larger than the total amount provided by the World Bank and the Inter-American Development Bank.


In Europe, Chinese FDI increased by 44 percent from 2014 to reach USD 23 billion in 2015, and could jump dramatically this year, especially as the Chinese state-owned enterprise ChemChina is expected to make a USD 43 billion acquisition of the Swiss seed and pesticide maker Syngenta.


Within Asia, China has deepened its relations with its all-weather partner, Pakistan, with the construction of the China-Pakistan Economic Corridor, backed by the Silk Road fund. In Southeast Asia, China’s popularity has prevailed. Among the Southeast Asian countries which have realigned themselves closer to China include Cambodia, Laos, American long-standing ally the Philippines, and Malaysia.



China’s growing financial clout has gradually chipped away at the United States as a superpower.



Malaysian Prime Minister Najib Abdul Razak’s recent visit to China has brought Sino-Malaysia ties to a new high as Najib sealed the first military deal between the two states — the purchase of four Chinese-made Littoral Mission Ships. The deal was “one of 14 memoranda of understanding (MOU) estimated at MYR 143.64 billion (USD 34.25 billion) signed after a ‘friendly and fruitful’ bilateral talks” between the countries’ leaders. China has also agreed to offer soft loans, estimated at MYR 55 billion (USD 13 billion), for the construction of Malaysia’s high-speed railway project that connects Kuala Lumpur and Singapore.


Najib is not the only ASEAN leader to openly embrace China. Philippine President Rodrigo Duterte publicly stated during his state visit to China last month that the Philippines is to be separated from the United States, ending their 70-year alliance. While Duterte’s remark left many flabbergasted, his “spilt” statement won the Phillipines USD 9 billion in loans and Filipino fishermen have been granted access to the disputed Scarborough Shoal.


The US in Retreat


The positions of Malaysia and Philippines have increasingly tilted towards China, but not without reason. China has been a generous funder to the Malaysian government, including “a USD 2.3 billion deal to buy assets of scandal-hit state fund 1Malaysia Development Berhad (1MDB) … helping ease Najib’s concern over the firm’s mounting debt” amidst the launch of investigations by the US Department of Justice on 1MDB. In the Philippines, Duterte’s anti-crime and anti-drugs campaign has invited heavy criticism from the United States for their alleged violations of human rights.


The US “pivot to Asia” policy announced in 2011 has yet to meet with much success, which perhaps “to Duterte and his countrymen, not unlike many of the other leaders in the region, Asia’s future was with China, not the US.” Undeniably, China’s growing financial clout has gradually chipped away at the United States as a superpower. However, it is not only the economic gifts offered by China that countries are looking for, but also the relative decline and incapability of the US as a superpower that has caused a teetering shift in its geopolitical vision.


With looming uncertainties in the US political sphere and economic outlook, the world has cast immeasurable doubt on whether US as the world leader will still be viable in the years to come. Specifically, US credibility has taken hard knocks with the mayhem in its 2016 general election. Many observers have questioned if the US has failed by the democratic system, and they also worry about the US’ wavering stance on its Trans-Pacific Partnership (TPP).


In a recent Time Magazine interview with Singapore’s Prime Minister Lee Hsien Loong, the leader’s candid comments clearly explain why countries in the region are taking a different stance on the US:


“You do not do things which the Chinese do. The Chinese go around with lollipops in their pockets. They have aid, they have friendship deals, they build you a Prime Minister’s office or President’s office, or Parliament House or foreign ministry. For them, trade is an extension of their foreign policy. You do not do these retail items. The one big thing which you have done is to settle the TPP, which Obama has done. It shows that you are serious, that you are prepared to deepen the relationship and that you are putting a stake here which you will have an interest in upholding. Now, let’s say you cannot deliver on the TPP. After you have gotten Vietnam to join, after you have gotten Japan to join, after Japanese Prime Minister Shinzo Abe has made very difficult arrangements on agriculture, cars, sugar and dairy. Now you say, ‘I walk away, that I do not believe in this deal.’ How can anybody believe in you anymore?”


While it is understandable why countries choose to adopt different trajectories, leading to a gradual change in the trend of international affairs and geopolitics, international stability can only be attained if and only if the two big powers are able to handle their domestic affairs. With the upheaval in the current US general election, and also power struggles within the Chinese Communist Party, neither the world nor its two major powers — China and the US — will be able to take the blow if either of them fails.


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