China’s Master Plan: A Worldwide Web of Institutions

(Bloomberg Opinion) -- (This is the third part of a series on China's effort to supplant the U.S. as the world's pre-eminent geopolitical power. Read the first two parts here: A Global Military Threat | Exporting an Ideology.)

The basic theme of this series has been the degree to which the challenge posed by rising, assertive China has both intensified and changed in recent years, as Beijing’s global ambitions and initiatives have reached a new level. While most Westerners are familiar with Beijing’s efforts to do so through its economic power and growing military might, another facet of that campaign has received less attention: China’s intensifying efforts to remake the international institutional order.

For decades following the establishment of the People's Republic in 1949, Beijing was an international renegade that sat outside most established institutions. From the 1970s onward, it gradually became a participant in but not a leader of a global institutional architecture dominated by the U.S. and its allies. Now, Beijing is establishing its own rival institutions and using them as part of its broader effort to reshape the world to its advantage.

It is easy to forget what a drastic break with the past this is. During the 1950s and 1960s, Mao Zedong's government was not even a member of the United Nations, because of its dispute with Taiwan over which country was the rightful representative of China. After China began its opening to the world in the 1970s, it gradually integrated into the international institutional order, joining the World Bank, International Monetary Fund, World Trade Organization, Nuclear Non-Proliferation Treaty, Asia-Pacific Economic Cooperation forum, and other agreements and bodies.

Yet even so, China largely declined a leadership role in these institutions. The second generation of Chinese leaders -- Deng Xiaoping and his disciples --adhered to the dictum that China should "hide its capabilities and bide its time." Some Chinese analysts even believed that U.S. calls for Beijing to become a "responsible stakeholder" in the international order were a trick to force China to exhaust itself by bearing the burdens of global leadership. 

Recently, however, Beijing's attitude has been changing. One reason is simply that the existing institutional landscape changed too slowly to accommodate its remarkable rise. Case in point: In 2010, the IMF approved a change in its voting quotas meant to reflect China's increasing weight in the global economy. Yet implementation was delayed for more than 5 years, because of the refusal of the U.S. Congress to ratify the change. In these circumstances, it was only natural for Chinese leaders to begin wondering how well existing international institutions served Beijing's interests, and whether they might do better by striking out on their own. 

Second, the value of institutional leadership as a competitive tool seems to have become more apparent to Beijing. It was surely not lost on Chinese leaders that America has long managed to use the institutions it leads --the World Bank, the IMF and others -- as force-multipliers for its own influence and power. And over the past decade, U.S. leaders have become more explicit in describing the creation of new institutions, such as the proposed Trans-Pacific Partnership trade area, as counterweights to a rising China.

This being the case, Chinese leaders could not help but consider how Chinese-led institutions might be useful in channeling Beijing's growing economic power into greater influence on the global stage. Add in the fact that China's surging national power has given it the ability to undertake initiatives that might have seemed costly distractions before, and the stage was set for a burst of institution-oriented energy. 

There have been three principal products of that burst. In 2015, Beijing created the Asian Infrastructure Investment Bank, a multilateral development bank dedicated to meeting Asia’s growing need for roads, pipelines, dams and the like. Since 2012, China has also been pushing for conclusion of the Regional Comprehensive Economic Partnership, a trade agreement involving the 10 countries of the Association of Southeast Asian Nations as well as China, India, Japan, South Korea, Australia and New Zealand.

Finally, there is the Chinese-led Belt and Road Initiative, an overlapping series of infrastructure, economic and other development projects encompassing countries across Eurasia and beyond.

So what does this mean for U.S. interests and the international system? In some ways, it is hard to argue with the more forward-leaning approach China is taking. These initiatives all respond to real needs -- the enormous infrastructure gap Asia faces, for instance, or the need to more tightly interlink the countries and economies that populate the Eurasian landmass. What’s more, the U.S. has been urging China to take a stronger leadership role in the international system for decades.

The trouble is that, just as U.S. officials have slowly become more concerned about how China will use its growing power, it may not like the particular ways in which Chinese institutional leadership is exercised.

No institution is truly apolitical. All international organizations reflect the geopolitical, economic and ideological preferences of their founders. The great fear among China-watchers in the U.S. and elsewhere is that Beijing will use these institutions in ways that privilege its own concept of international order -- one that is quite different than what America, its allies, and other democratic countries may wish to see.

It seems likely, for instance, that Beijing will use its regional economic pact and infrastructure bank as tools for drawing neighboring countries deeper into its economic orbit, slowly but surely rendering them less capable of remaining geopolitically independent of China.

Leading experts also believe that China will use Belt and Road projects to reinforce corrupt, authoritarian regimes and win diplomatic and economic influence at the expense of the U.S.  and other geopolitical competitors.

Chinese loans and development aid, for example, have already turned into debt traps that have been sprung on relatively poor countries such as Sri Lanka, forcing them to turn over control of key infrastructure, such as ports, to Beijing.

As I discussed in the first installment of this series, the implications of such developments for China’s military-power projection capabilities are ominous. In sum, China has learned that institutional leadership is a form of national power, and that it can be manipulated to good -- or bad -- effect by a country with a cut-throat geopolitical ethos and lots of money to spend. 

To be sure, Beijing still faces lots of obstacles in realizing its ambitions for these various projects, and America’s global institutional leadership remains vastly more impressive than China’s. But at the very least, China is sending the message that Washington’s primacy in the world’s institutional architecture is no longer so complete.

What’s equally clear, at least so far, is that the U.S. and the West are not adequately responding to the challenge. The Barack Obama administration, concerned about the political, geopolitical, and environmental effects of AIIB projects, tried to organize a boycott of that institution but failed in embarrassing fashion.

The TPP would have helped offset China’s regional economic partnership, and Beijing’s economic heft more broadly, but the Donald Trump administration shot America and its geopolitical partners in the collective foot by withdrawing from that agreement in early 2017.

U.S. and allied officials wring their hands about the unhealthy effects of Belt and Road but have failed to offer much of an alternative. As in so many cases, the full extent of the challenge China poses is becoming clear, but the solutions have yet to be identified.

Finding those solutions is the subject I turn to in the final installment of this series.

©2018 Bloomberg L.P.

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