1.1. BRI as National Apparatus to Maintain China’s Imploding Economy
The Belt and Road Initiative is meant to maintain the continuation of China’s economic development via cooperation with SEA countries. Ever since China embarked upon the path of economic reform back in the days when Deng Xiaoping was in power, China has taken a new path to tackle foreign affairs and started bonding with neighboring countries seeking new investment opportunities for herself. The Belt and Road Initiative (BRI) concept could be considered a broader version compared to the economic reform in the 80s and a deeper relation is to be found towards the countries with which China engages.
Some countries might consider China’s implementation of the “Belt and Road” is to expand its influence and attempt to challenge international financial and economic order. It is also doubtful to many in terms of checks and balances of power in the scope of BRI, and this strengthens the China Threat theory, hampering China’s diplomacy on a regional scale. As a source of funding, The Asian Infrastructure Investment Bank (AIIB) advocated by China had strong opposition among US allies such as the United Kingdom, South Korea, and other countries. It is publicly questioned that the level of AIIB’s regional governance might fall heavily to China and gives China the right to interfere with the domestic affairs of the countries joined.
US military involvement in the South China Sea dispute between China and some Southeast Asian countries illuminates their concerns over a rising China as a regional hegemon. It has brought a potential hindrance to the advancement of the new sea silk road, which has caused certain obstacles to China’s promotion of the Belt and Road.
Both the Philippines and Vietnam have territorial disputes with China in the South China Sea region. BRI route enters the South China Sea. Upon drafting and implementing cooperation programs, there is of high chance to trigger new rounds of sovereignty disputes affecting China’s diplomatic relations with these countries. The
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local people would, therefore, have less confidence in the Chinese government because of the South China Sea issue. Anti-China demonstrations will also affect Chinese companies’ investment in the local area, as well as Chinese tourists visiting the area, which is not conducive to bilateral cooperation. Disputes and contradictions occur, but China has been finding its own way to bypass traditional concepts when hooking ties with countries that are contentious. Although China and the Philippines have territorial disputes and conflicts in the South China Sea region, since the end of 2016, the current President of the Philippines, Duterte has repeatedly expressed his willingness to cooperate closely with China in economic cooperation (Calonzo, 2019). He believes that the two countries should “talk more about economic and trade cooperation, talk less about differences, and signed several bilateral cooperation documents with China during his visit to China.” The Chinese Foreign Ministry also publicly stated that China is willing to actively cooperate with the Philippines in the areas of the economy, trade, production capacity and infrastructure to support the social construction of the Philippines. This shows that China and the controversial countries can also work closely together to help reduce some countries’ doubts about China’s development.
In traditional international trade, comparative advantage model focuses on relative factor endowments and international specialization. The neoclassical model shows that all countries gain from trade and the output of international market increases as long as trade is structured upon a well-functioning system in which all countries hold their comparative advantages and there are no barriers in between. However, if there is no governmental interference in trade, it is doubtful that the private sector would establish a mechanism by which industries fulfill self-help and flourish in the long-run.
To make a contrast with the past, while imperialist countries back in the 19th century structured themselves upon exploitation and unfair international trade, even to this day and age, given to the Race to the Bottom conception adopted by many western
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countries, Multinational Corporations (MNCs) are still exploiting less developed countries in SEA for their cheap labor to maximize their revenue. In other words, while importing those low-priced laborers and not treating them equally is slavery, stationing them overseas simply justifies. China’s rising global presence skipped what was considered the necessary evil by western countries, such as Britain, France and other colonizers, and achieved economic success ever since the 1978 economic reform at an efficient speed. In a way, the Chinese have changed the characteristics of being a global power and a different manner to re-brand the nation. Maintaining reasonable tariffs to protect infant industries in order to prevent foreign firms to exploit domestic low-cost labor and resources, governments in developing countries sometimes build trade strategies including export promotion versus import substitution. Whether China’s Foreign Direct Investment (FDI) which comes along with BRI will play a pivotal role in the process is indeed crucial in observing the effectiveness of China’s modern regional presence in SEA economically.
1.2. The Potential Role of BRI in South East Asia
The materialistic fruit brought by the successful economic reform indeed enhanced China’s global GDP ranking and altered the way China is viewed by the world. Now, with the Belt and Road Initiative, the concept of regional connectivity highlights that China is eager to build individual linkage respectively with the countries along with the project. Liu (2015) suggests that the Belt and Road Initiative serves as financing platforms and logistical hubs, which creates a new model of non-western mechanisms for cooperation. He also points out China’s determination to shift its geopolitical strategy over the control over developing and underdeveloped countries that used to fall under the category under the strong western colonial influence. Especially the targets of maritime deployment that scattered along the Maritime Silk Road are the countries
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of developing and underdeveloped countries which have growing cargo import from China (Liu, 2015). The most salient impact brought by Maritime Silk Road Initiative will be the “spillover effect” in international trade. The growth of foreign direct investment (FDI) would subsequently cause an increasing demand for international logistics, leading to a lucrative reliance in the shipping industry (Jiang, Li, & Gong, 2018). As western countries have accomplished in the 19th and 20th centuries, this offers opportunities for China to transform from a land-based nation to further project the country into a maritime regional hegemony.
The deployment of the Maritime Silk Road Initiative is positioned upon multiple interpretations of globalization and to be more specific, cross-regional integration.
While globalization triggers increasing openness of markets to international trade, financial flows, and outward foreign direct investment, concerns such as inequality occur systematically. Many developing countries rely heavily on exports of primary products, namely agricultural raw materials, minerals, ore and metal at high risks and market uncertainty. Those countries, therefore, depend greatly on imports, especially on machinery, foreign capital, intermediate producer goods, and consumer products.
Most of the countries scattered along BRI are mostly developing and underdeveloped countries suffering from chronic deficits on current and capital accounts, many due to their colonial past, which exhausts their reserves, causing currency instability, and economic slowdown. China, on the other hand, offers a potential alternative for them to de-link themselves from western powers and engage in long-term infrastructural development and economic reforms that they are open for collaboration.
Compared with countries in Europe, before the falling of the Berlin wall and the cold war with the Soviet Union ended, the rest of the world aside from the West, namely now we refer to them as developing countries and underdeveloped countries, were still struggling economically. International aid structured upon the United Nations
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framework offered other less-developed countries aid such as economic institutions, the International Monetary Fund, and the World Bank. Even to this day and age, we could still figure that The Washington Consensus was basically set on a free market trade system in which a large proportion of dependency theory applies. As US foreign policy remains dominant in the international realm, the chain of hierarchy in the supply and demand of free-market trade is extremely hard to break. The consensus suggests that the privatization of state enterprises is necessary and typically, in developing countries, these industries include railway, oil, and gas. Based on free-market trade, the obliteration of trade barriers and unnecessary tariffs are all in the guideline of reforms for developing and underdeveloped countries. Agarwal in his article points out that free trade is not always in the best interest of developing economies. While underdeveloped countries and developing countries open their market for FDI and engage in economic deregulation, the potential risk would endanger the infant industries in their own countries. What they need is proper protection and subsidies instead of solely relying on foreign investment (Agarwal, 2018). In the worst-case scenario, infant industries might not have the chance to engage in industrial transformation.
As President Donald Trump’s “America First policy” directing the nation into an isolationism-oriented way, the vacuum offers new opportunities in the previously western-influenced regions. For countries as potential clients for China’s Maritime Silk Road Initiative, Browne (2015) states that “The Silk Road Economic Belt represents the most significant economic proposal any country has put forward to help stabilize chaotic parts of the world. Moreover, it’s backed by hard cash: China is putting its $3.5 trillion of foreign exchange reserves behind the effort to kick-start growth and create jobs in Muslim areas (Browne, 2015, p.1-4).” In other words, China’s Maritime Silk Road Initiative is a highly political strategy wrapped with the clothing of economic aid, which leads people to think of the gigantic Road and Belt Initiative more politically
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manipulative than The Marshall Plan. Putting a potential impact on the existing, US-established framework in SEA, Chen concludes that “the rebuilding of the trans-regional institutions definitely touches the concerned principles, norms, rules and decision-making arrangements that reflect the core elements of the status quo hegemony. China’s push for the OBOR initiative has triggered soft leadership competition in terms of the international institutional arrangements. The OBOR initiative has impacts that entangle the global institutional leadership (Chen, 2017, p.21).” That is to say, with the launching of BRI, it is both predicted and expected for parties in SEA to face the collapse of two systems, and whether like it or not, it is by all means for the involved to resolve such bilateral balance of power peacefully.
As this notion of strong countries helping the poor out of humanitarian perception narrates a good story, this somehow excuses the reality of predators preying on the weak.
The reason why SEA falls into the model for BRI’s effectiveness is that the less developed context suits perfectly for China’s Robin Hood narrative. Overall, Southeast Asia is a potential market for the Belt and Road in that the region seeks more opportunities for business and lack infrastructure. Due to the fact of the poor political transparency, idling debts, in the long run, may trigger the risk of China turning it into a bargaining chip. The investment flow of funds in SEA poured in by China is still opaque and China is still refusing to comply with international rules in its process of promoting BRI.
1.3. Main Debate and Two Questions
After acknowledging the importance of BRI, functioning as a way out to soothe China’s imploding economic development, we could further infer that the launching of BRI serves as key criteria to evaluate China’s regional influence in South East Asian.
In terms of China’s launching BRI in South East Asia, I will first deal with the positive
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influence of BRI on US Role in South East Asia. Subsequently, this research attempts to respond to two critical questions regarding the development of China’s BRI in SEA.First, while there are positive and negative perspectives regarding China’s BRI, which perception is more suitable for explaining the progressiveness of BRI. Secondly, to further discuss the effectiveness of the development of BRI in ASEAN, this research will discuss whether the development of MRSI would affect the economic relations between the USA and ASEAN, and to what extent will China takes the US’ share in South East Asia?
1.4. Research Method and Thesis Structure
To answer these two questions, this research includes five chapters to give an overall picture of China’s massive BRI project in the sense that delineates China’s ambition and result of economic influence in SEA. Chapter 1 introduces the blueprint of China’s BRI under the BRI framework and gives a brief picture of this grand project.
Chapter 2 analyzes the different perspectives of BRI, a cultural linkage of China and SEA region and Sino-American leverage in SEA region in both the positive and negative perspectives. Then, in Chapter 3, an assessment of bilateral relations regarding trade and investment between China and ASEAN countries is performed to observe the development after China interacted economically through BRI with ASEAN countries.
Based on this observation, I will answer the first question: while there are positive and negative perspectives regarding China’s BRI, which perception is more suitable for explaining the progressiveness of BRI In Chapter 4, this research will depict how the trend of such relations could affect Sino-American influence in SEA. Based on this observation, I will answer the second question: whether the development of MRSI would affect the economic relations between USA and ASEAN, and to what extent will
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China takes the US’ share in South East Asia? Finally, in Chapter 5, I will discuss the role of US in South East Asia after the Belt and Road Initiative.
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Perspectives of China’s BRI in South East Asia
In this chapter, I will discuss the positive and negative opinions regarding whether China can successfully promote its Maritime Silk Road Initiative in SEA. In the first, research holding a positive standpoint on the launching of BRI believes that launching such project will serve their national interest and therefore support this massive project.
On the other hand, in section two, those holding a pessimistic viewpoint regard BRI as a risky and dangerous act that harms the development of a country in the process of accepting aid from BRI. Subsequently, in sections 3 and 4, I will discuss whether a relationship of competition exists between China and USA in SEA, and answers the above two questions to demonstrate the possibility and potential of BRI in SEA.