China’s Charm Offensive

Kristof (1993) wrote an article on the rise of China. He described China as the fastest growing economy in the world, which may displace the United States in the first half of the 21^st century to become the largest economy in the world. In addition, China’s steady rise in economic power projected its political influence, which may reshape international politics.

China’s economic superiority affects the status of the United States in the Southeast Asian market to some extent. In particular, China has bypassed the United States to became the major trading partner of the Philippines and Vietnam. Thus, China’s economic power plays a more influential role in Manila and Hanoi. Through employing economic instruments, Beijing may eventually attain its political purposes to make Manila and Hanoi compromise in South China Sea disputes.

Because economic interests and South China Sea disputes have become the main diplomatic concerns in Southeast Asia, countries in the region have strived to increase trade volumes, investments, and loans. It offers China the opportunity to display its economic power, though inviting Southeast Asian countries, including the Philippines and Vietnam, to strengthen economic and trade relations. It is notable that regional stability is also useful for China’s economic sustainable development. China became a dialogue partner of ASEAN in

‧

國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

17

2006, proposed the establishment of a free trade area with ASEAN in 2001, and signed the CAFTA in 2002. Under the framework of the CAFTA, China planned to complete a free-trade agreement with ASEAN-6: Indonesia, Thailand, Singapore, Malaysia, the Philippines, and Brunei. In addition, China will plan a free-trade area with Cambodia, Laos, Myanmar, and Vietnam by 2015. In 2005, China provided preferential tariff treatment to Cambodia, Laos, and Myanmar. In 2007, China and ASEAN signed agreements on trade in services.

These acts demonstrate China’s attempts to create a friendly investment environment and to draw ASEAN countries to its side.

In addition to China’s economic attractions, it has followed a policy of “good neighbour” diplomacy. Academics have called this behaviour a “charm offensive.” Deng Xiaoping made building a favourable economic environment the top priority for Beijing.

China’s diplomatic policy also served this purpose. Following a strategy of “keeping a low profile and developing the economy,” Deng Xiaoping proposed the principle of “putting aside disputes to develop communally” in handling South China Sea disputes.

China’s attitude in handling South China Sea disputes was not only “keeping a low profile” but also “making a difference” (Chinese Communist News, 2010). To fulfil its national core interest, Ching needed to ensure and improve peripheral diplomacy and followed its principle of negotiating directly with disputing parties. Under the policy of an

“amicable, secure, and prosperous neighbourhood” (CRI Online, 2007) , China reinforced cooperation with ASEAN and established a strategic partnership. China created an atmosphere of demanding neighbouring countries to consider bilateral political interests when handling maritime disputes. In addition, China always sought win–win solutions based on full negotiations. Hence, China deepened and fostered economic ties with Southeast Asian countries, to emphasize that cooperation was superior to confrontation. It then pursued the policy of “putting aside disputes to develop communally” to finally resolve South China Sea disputes (People’s Tribute, 2014).

China’s strategic involvement in Southeast Asia is of specific concern (Yang, 2014).

By providing economic incentives, including foreign direct investment (FDI) and developmental aid in local infrastructure projects, China has successfully refined its relations with its Southeast Asian counterparts. As Ikenberry (2008, pp. 23-24) observed, China may try to use its growing influence to reshape the rules and institutions of the international system to effectively serve its interests.

‧

國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

18

Since the late 1980s, China has pursued a charm offensive strategy. It was exhibited in 1997, the year of the Asian financial crisis; Beijing refused to devalue the Renminbi, which would have exacerbated devaluations in Thailand and Indonesia, and portrayed its decision as standing up for other Asian nations. Because of this, 1997 marks the date to mark China’s soft-power emergence in Southeast Asia (Kurlantzick, 2006). In the report on China’s 15^th National Congress of the CPC, China’s General Secretary of the CPC Central Committee, Jiang Zemin, noted that Chinese investors shall be encouraged to invest abroad in areas that draw on China’s comparative advantages, to effectively use both Chinese and foreign markets and resources (Jiang, 1997). Taking the chance, Beijing expanded its economic influence as a major political force in the region and an engine for economic recovery (Yuan, 2006). Since December 11, 2001, China has been a member of the World Trade Organization. Beijing not only accelerated its process of internationalization and opening of markets, but also provided Asian countries with additional opportunities for trade and investment. However, Beijing’s economic power affected China’s major trade partners in attracting foreign investment and exporting competition. Hence, the countries at China’s periphery worried about facing the challenges of its emerging economy (Yen et al., 2003). In 2002, China and ASEAN signed the “People’s Republic of China and the ASEAN Framework Agreement on Comprehensive Economic Cooperation,” promising to open each member country’s market gradually. As Glaser (2014) noted, this was followed by Deng Xiaoping’s diplomacy and is known as the first charm offensive.

Since ASEAN countries highly participated in globalization and were deeply dependent on exports, they were affected during the financial crisis of 2008. It also created a chance for ASEAN countries to increase their economic autonomy. Meanwhile, China escalated its economic position. With its geopolitical advantage, the closer trade relationship between China and ASEAN countries fostered China’s international competition.

After the financial crisis of 2008, with many countries eager for foreign investment to improve their infrastructure, China expanded its direct investment. At the same time, China faced some risk because of anti-foreign investment movements and globalization boycotts.

From 1997 to 2006, China’s basically adopted Deng Xiaoping’s diplomatic strategy of not allowing South China Sea disputes to become a hindrance to China’s economic development. That is, in 1984, Deng Xiaoping outlined his diplomacy for handling South

‧

國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

19

China Sea disputes: (a) sovereignty belongs to China; (b) disputes can be set aside; and (c) joint development can be pursued. The main purpose of the policy was to focus on China’s economic development. Hence, China actively established economic relations with Southeast Asian countries during its period of “keeping a low profile.” With China’s economy growing rapidly, Beijing transformed its attitude from “keeping low profile” towards “making a difference”; China’s national interests were now at the core, and thus, the South China Sea issue infringed on China’s sovereignty. Therefore, following the good-neighbour policy, China intensified its economic relationship with ASEAN countries, aiming to make them realize that cooperation was preferable to confrontation, and then returning to “shelving disputes and joint development” (Zhang, 2005).

Storey (2011, p. 267) observed that during the “golden age” of closer Philippine relations with China, President Arroyo was determined to take advantage of China’s burgeoning economy. Beijing responded positively as part of its charm offensive strategy, promising to provide large infrastructure projects in the Philippines. China took economic-friendly actions to make amends with the Philippines and create deeper interdependence. In providing what the Philippines wanted, China also alleviated its unemployment problem by sending Chinese workers to carry out infrastructure projects.

One group of Chinese scholars, Zhang (1999), Guo (2004), Wang and Deng (2006), Shao and Fu (2005) etc. concerned about the international image of the “threat of rising China,” agreed with the good-neighbour policy. Some Chinese scholars tending towards nationalism initiated a revival of wuwang guochi (never forget the national humiliation), and regarded the friendly diplomacy as a humiliation to the state. They point out that China abides by the principle of “putting aside disputes to develop communally”; however, countries such as the Philippines and Vietnam do not do the same. Hence, they advocate deviating from the original principle, giving up the passive attitude, and taking tough measures, including economic punishments, to handle South China Sea disputes. These scholars claim that other states are extensively exploiting oil and natural gas in the disputed waters, and hence China must accelerate its development (An, 2011); Li Liang (2011) suggests that China’s further development can resolve these disputes. If China had already effectively achieved the management and development of marine resources within the

‧

國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

20

traditional nine-dash line area,¹ then South China Sea disputes or conflicts would not easily occur.Based on these considerations, China is intentionally expanding its energy exploration area, and is encouraging energy corporations to develop oil and natural gas resources.

S. Zhao (1999) contended that although China felt it needed a peaceful and stable peripheral environment for its own domestic interests, it initiated a diplomatic offensive to develop friendly economic and security relations with ASEAN countries in accordance with its periphery and good-neighbour policies. As Yang (2014) observed, maintaining and stabilising relational asymmetries in Southeast Asia was thought to be conducive to the fulfilment of China’s domestic need for development and to secure its centrality in the region.

Storey (2010), H. Zhao (2013), and Glaser (2014) proposed that China is continually losing its momentum to employ the charm offensive in Southeast Asia. China has departed from practicing its good-neighbour policy and has become assertive over energy exploration, seemingly in contrast to Deng Xiaoping’s guidelines. For example, the Scarborough Shoal standoff is a reflection of the underlying tension and competition between China and the Philippines (H. Zhao, 2013). It reflects Beijing’s transformation in attitude and diplomacy, from employing economic attractions to employing economic coercion. The following section describes how China employs such economic instruments.

1.4 Research Framework and Research Design