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Chinas maritime silk road initiative and south asia a political economic analysis of its purposes, perils, and promise

PALGRAVE STUDIES
IN ASIA-PACIFIC
POLITICAL ECONOMY

China’s Maritime Silk Road
Initiative and South Asia
A Political Economic Analysis of its
Purposes, Perils, and Promise

Edited by
Jean-Marc F. Blanchard


Palgrave Studies in Asia-Pacific Political Economy
Series Editor
Jean-Marc F. Blanchard
School of Advanced International and Area Studies,
East China Normal University,
Shanghai, China
Mr. & Mrs. S.H. Wong Center for the Study
of Multinational Corporations, Los Gatos, 

California, USA


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Jean-Marc F. Blanchard
Editor

China’s Maritime Silk
Road Initiative and
South Asia
A Political Economic Analysis of its Purposes,
Perils, and Promise


Editor
Jean-Marc F. Blanchard
School of Advanced International and Area Studies
East China Normal University, Shanghai, China
Mr. & Mrs. S.H. Wong Center for the Study
of Multinational Corporations, Los Gatos
California, USA

Palgrave Studies in Asia-Pacific Political Economy
ISBN 978-981-10-5238-5    ISBN 978-981-10-5239-2 (eBook)
DOI 10.1007/978-981-10-5239-2
Library of Congress Control Number: 2017952342
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This book is dedicated to my mother for her unending support for my
education and learning through all the years.


Preface and Acknowledgements

In November 2015, the Mr. & Mrs. S.H. Wong Center for the Study of
Multinational Corporations (Wong MNC Center), a US-based think tank
focusing on the political economy of multinational corporations in/from
East Asia, and East China Normal University (ECNU)’s School of
Advanced International and Area Studies (SAIAS) orchestrated a very successful international academic conference in Shanghai entitled “The
Political Economy of China’s Maritime Silk Road Initiative and South
Asia” which gathered academics, consultants, and researchers from
Australia, China, India, and the United States of America to present their
latest research findings about and discuss topics such as the goals, implementation, and implications of the MSRI.  Seeking to go beyond past
treatments of the Maritime Silk Road Initiative (MSRI), which have often
been subsumed within overly general discussions of China’s One Belt,
One Road (OBOR) initiative, workshop participants focused only on the
MSRI, examined specific country pairs like China’s MSRI and Pakistan,
China’s MSRI and India, and China’s MSRI and Sri Lanka, and undertook deeper political economic analysis than most other analysts do. The
results of that conference are embodied in this book, which represents one
of the most in-depth contemporary treatments of the MSRI.
There are many who merit acknowledgement for their contribution to
the aforementioned conference as well as this book. At the institutional
level, I would like to thank ECNU and, above all, ECNU SAIAS where I
currently serve as Distinguished Professor, for their financial and administrative support for the November 2015 event and this multi-year project
on China’s MSRI.  Beyond this, I would like to thank the Wong MNC
vii


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PREFACE AND ACKNOWLEDGEMENTS

Center for its vital managerial, financial, and administrative support for this
project, a topic which the Wong MNC Center Board of Directors immediately recognized has great importance to multinational corporations in
and from East Asia and is pervaded by political economic dynamics.
In terms of individuals, Professor Liu Jun, ECNU SAIAS Dean, was a
vital backer of the aforementioned conference and from the get-go
expressed ECNU SAIAS’s willingness to host it and contribute resources.
I also would like to thank my colleagues Professor Zang Shumei and Ms.
Chen Jing who ably dealt with a slew of conference matters. All the participants in the November 2015 event, many of whom are contributors to
this book, deserve appreciation for their intellectual contribution and
enthusiastic participation. I would like to express my gratitude to Professor
Yang Jiemian, former President of the Shanghai Institute of International
Studies, Ambassador Liu Youfa, former Consul General of the People’s
Republic of China in Mumbai, Professor Feng Shaolei, former Dean of
the ECNU SAIAS, Professor Zhang Cuiping, Deputy Director, Research
Institute for Indian Ocean Economies, Professor Shi Yinhong, and
Professor Zheng Yu for taking time out of their busy schedules to participate in the November conference. Special thanks are due to Professor
Yang and Ambassador Liu for giving very informative keynote speeches.
Professors Colin Flint and Gregory Moore also deserve special acknowledgement for their yeoman’s discussant work providing content on
numerous papers delivered in Shanghai. Professor Flint also warrants special mention for his guidance on and involvement, as advisor, editor, and
contributor, in a special section of Geopolitics (entitled “The Geopolitics of
China’s Maritime Silk Road Initiative”) in which a few of the conference
papers appeared. I look forward to opportunities to work with Colin in
the future. Finally, Dr. Bas Hooijmaaijers, my new colleague at ECNU
SAIAS and the new Assistant Director of the Wong MNC Center, merits
kudos for his excellent work in assisting with the production process for
this book. I look forward to many years of collaboration in the future. Ms.
Chen Yifan’s efforts in support of the production of the book are also
much appreciated.


Contents

1China’s Twenty-First Century Maritime Silk Road
Initiative and South Asia: Political and Economic
Contours, Challenges, and Conundrums 1
Jean-Marc F. Blanchard
2 China’s Rise and the Eurasian Transportation Revolution 33
John W. Garver
3The MSRI and the Evolving Naval Balance
in the Indian Ocean 55
David Brewster
4China’s Strategy Towards South Asia in the Context
of the Maritime Silk Road Initiative 81
Xinmin Sui
5The China–Pakistan Economic Corridor
and the China–India–Pakistan Triangle 105
Jabin T. Jacob

ix


x  

Contents

6Sri Lanka, the Maritime Silk Road,
and Sino-­Indian Relations 137
David J. Karl
7The Maritime Silk Road and China–Maldives Relations 173
Srikanth Kondapalli
8The MSRI, China, and India: Economic Perspectives
and Political Impressions 203
Amitendu Palit
Index 229


List of Figures

Fig. 1.1
Fig. 8.1

Map of China’s Twenty-First-Century Maritime
Silk Road Initiative
Intraregional trade shares (%) 

4
205

xi


List of Tables

Table 5.1 
Table 7.1 
Table 7.2 
Table 8.1 

Pakistan–China Bilateral Trade, 2005–2014
Maldives trade with China, 1999–2003
China–Maldives trade, 2003–2014
Busiest container ports on MSRI route, 2013

110
186
187
215

xiii


CHAPTER 1

China’s Twenty-First Century Maritime Silk
Road Initiative and South Asia: Political
and Economic Contours, Challenges,
and Conundrums
Jean-Marc F. Blanchard
Introduction
In 2013, People’s Republic of China (PRC) President Xi Jinping put forth
two separate initiatives, the Maritime Silk Road (MSR) initiative (MSRI)
and the Silk Road Economic Belt (SREB) plan, both integral components
of the Chinese mega-project known as One Belt, One Road (OBOR). It
is far from a foregone conclusion that China’s two ambitious plans will
yield what Beijing wants them to deliver economically or politically or that
both projects will be fully realized. Regardless, it is hard not to be captivated by the two schemes given their immense scale and potentially transformative effects on power hierarchies, global, regional, and subregional
institutions, individual countries, and multinational corporations (MNCs).

J.-M.F. Blanchard (*)
School of Advanced International and Area Studies, East China Normal
University, Shanghai, China
Mr. & Mrs. S.H. Wong Center for the Study of Multinational Corporations,
Los Gatos, California, USA
© The Author(s) 2018
J.-M.F. Blanchard (ed.), China’s Maritime Silk Road Initiative
and South Asia, Palgrave Studies in Asia-Pacific Political Economy,
DOI 10.1007/978-981-10-5239-2_1

1


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J.-M.F. BLANCHARD

As well, top PRC decision-makers have made abundantly clear that OBOR
is a top Chinese-government policy priority.1
To date, scholars have provided background on OBOR, assessed its fit
with China’s grand strategy, and probed its links to China’s energy security.
In addition, they have considered OBOR’s implications for the PRC’s bilateral relations and global security, examined the economic issues ­associated
with China’s schemes, and judged OBOR’s narratives. Beyond this, they
have opined on OBOR’s attractions, challenges, and ­significance.2 While
the existing literature is useful in providing information about OBOR, it has
diverse shortcomings. First, there are few monograph-length treatments and
most works speak to OBOR as a whole even though the MSRI and SREB
have their own unique features, players, and obstacles, which necessitate
separate, in-depth discussions. To illustrate, China–India relations are a
huge issue requiring detailed attention in studies of the MSRI, whereas
China–Russia relations and Xinjiang are significant questions meriting
extensive analysis in the case of SREB analyses. Second, many studies neglect
the interaction of politics and economics, even though they will be, and are,
closely intertwined and OBOR will have political and economic effects.
Third, most studies overlook the role of subnational (e.g., Chinese provinces) and nonstate actors (e.g., MNCs) even though they are both objects
of the MSRI and SREB and shapers of them.3 In light of these limitations,
the Mr. & Mrs. S.H.  Wong Center for the Study of Multinational
Corporations organized a conference on “The Political Economy of the
Maritime Silk Road Initiative and South Asia,” which was co-hosted with
the School of Advanced International and Area Studies, East China Normal
University, in November 2015. At the behest of the organizers, presenters
offered papers related only to the MSRI and, moreover, narrow topics such
as China, the MSRI, and Sri Lanka, or the MSRI-Indian business dynamic.
There are numerous theoretical rationales for studying the MSRI. One is
that it can inform work on the political economy of national security which
contemplates how economic forces influence state policies.4 Second, it can
enhance our knowledge of the factors shaping China’s foreign policy and its
implementation. Third, it can provide a mechanism for appreciating how
geography molds and is molded by foreign policy.5 From a policy standpoint, the MSRI merits analysis because it entails the creation of international organizations, the reconfiguration of the Asia-Pacific Region (APR)’s
infrastructure, and closer political ties between China and MSRI participants as well as a, potentially, greater leadership role for China.6 To paraphrase John Garver (see Chap. 2), the MSRI and associated schemes, which


  CHINA’S TWENTY-FIRST CENTURY MARITIME SILK ROAD INITIATIVE...   

3

consist of interlinked, intermodal sea-land corridors, mean China will no
longer be trapped in East Asia because with its “application of modern
transportation technology … age-old geographic barriers … are collapsing”
and China will be able to interact at greater distance, more intensively, and
in a more sustained way than ever before.7 Turning to economics, we should
study the MSRI because it will affect: aid; trade and investment flows; the
growth rate of China and MSRI participants; and renminbi (RMB) internationalization. For businesses, it will raise new competitive challenges in the
form of Chinese companies and “Chinese” goods going overseas.
Acknowledging that the MSRI is a work in process and that many
things can change as it unfolds, this volume offers several key findings,
some already recognized and others less well appreciated. One is that the
MSRI has numerous economic and political purposes and that, on a
related note, even if it does not have explicit political objectives there still
are likely to be political consequences flowing from it. Regarding the latter, however, it is important to point out, as this volume shows, that the
link between economic and politics is a contingent one and affected by
numerous intervening factors. Another is that China faces a number of
serious political and economic challenges in bringing its ambitious venture
to fruition in South Asia. These challenges include India’s ambivalence
(and even opposition), the need to coordinate government ministries and
subnational actors (e.g., provinces), the troubled economic and political
situation in some of its partner countries (e.g., Pakistan), the immense
amount of money needed, and the risk that a successful MSRI may breed
a backlash among partner and host countries. Yet another is that nonstate
actors in China, MSRI participants, and MSRI non-participants are an
important part of the story of the MSRI in South Asia.
The next section provides basic background information on the MSRI,
delving into, among other things, its geographic features, its participants,
and a number of actions China has already taken to advance it. The third
part of this chapter delves into the initiative’s putative economic objectives
and the obstacles China will face in realizing them. The fourth section
considers the plan’s potential political goals and the challenges China will
face in bringing them to fruition. The fifth part provides an overview of
the chapters in the volume and assesses what they have to say about the
future of the MSRI and its potential political and economic implications.
The last section inter alia supplies some summary remarks, highlights
various findings of interest to academics, business people, and ­policymakers,
and identifies some potential avenues for future research.


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J.-M.F. BLANCHARD

Background on the MSRI
In October 2013, Chinese President Xi Jinping proposed the idea of a
MSRI during a visit to Indonesia.8 China’s contemporary MSRI (see
Fig. 1.1 below) relates to the ancient maritime Silk Road that began in
Fujian (a province in China) and connected to Southeast Asia through the
South China Sea and then, via the Malacca Strait, Indian Ocean, and the
Mediterranean, to Europe, still the end destination of the contemporary
MSRI. Unlike the ancient maritime Silk Road, news reports officials suggest that it is possible the contemporary MSRI may branch to various
African countries like Djibouti, Kenya, Madagascar, Mozambique, and
Tanzania and that the MSRI may have a branch linking it to the South
Pacific Islands.9
The MSRI involves dozens of hard infrastructure initiatives on the land
and sea as is well detailed in the chapters by Garver, David Brewster, Jabin
Jacob, and Amitendu Palit, among others. Specifically, it will entail the
construction of hundreds of billions of dollars’ worth of projects with
dual civilian and military potential such as airports, bridges, pipelines
and  power plants, railways, and roads. Furthermore, it will include the

Fig. 1.1  Map of China’s Twenty-First-Century Maritime Silk Road Initiative


  CHINA’S TWENTY-FIRST CENTURY MARITIME SILK ROAD INITIATIVE...   

5

­ evelopment of large industrial parks and special economic zones (SEZs)
d
and the construction of factories and trade zones within these parks and
SEZs. Many expect the development of the MSRI will also witness large
investments in shipping, communications, energy, commerce, tourism,
information technology, biotechnology, and alternative energy as investors try to take advantage of the opportunities flowing from it, and as it
boosts economic activity in China as well as MSRI participant nations.
Finally, the MSRI will bring with it trade fairs, exhibition halls, and other
structures that facilitate and support MSRI-related economic activity.10
It needs to be appreciated that the MSRI is not just about hard infrastructure and that Chinese leaders seek the development of soft infrastructure, too. President Xi has stated, “linking Asian countries is ‘not merely
about building roads and bridges or making linear connection of different
places … it should be a three-way combination of infrastructure, institutions, and people-to-people exchanges and five-way progress in policy
communication, infrastructure connectivity, trade link[s], capital flow[s],
and understanding among peoples.’”11 This soft infrastructure will or
should entail various hard and soft institutions: accords on air travel and
logistics, agreements to facilitate people-to-people exchange, bilateral
investment treaties, policy coordination among MSRI participant nations,
and structures allowing for the movement of capital, goods, and labor.12
Beijing has taken numerous steps to advance the MSRI which have
involved leveraging its own financial muscle. One was the establishment of
financial institutions such as the $40-billion Silk Road Fund (SRF) and the
$50-billion Asian Infrastructure Investment Bank (AIIB), which will fund
infrastructure projects relating to the MSRI, SREB, and OBOR as a
whole. Another is to direct existing financial institutions to support the
MSRI. In this vein, the China Development Bank (CDB) reportedly plans
to invest more than $890 billion in the MSRI and other OBOR initiatives.13 On top of this, in August 2015, China’s State Administration of
Foreign Exchange (SAFE) injected $90 billion into the CDB and into the
Export-Import Bank of China (the China Exim Bank) to support the
MSRI and other initiatives.14 Per the official Chinese media, Chinese
financial institutions already have entered into a number of concrete financial undertakings, with the China Exim Bank having funded more than
1000 MSRI- and SREB-related projects in 2015 alone.15
Looking specifically at the MSRI and South Asia, China has pursued
warmer relations with diverse countries such as Maldives, Pakistan, and Sri
Lanka through various political and economic mechanisms. To illustrate,


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J.-M.F. BLANCHARD

in the case of Maldives, Srikanth Kondapalli (Chap. 7) exhaustively details
high-level civilian and military exchanges between the two countries, various formal bilateral agreements, and Chinese backing for part of Maldives’s
key diplomatic agenda like measures to fight climate change.16 With respect
to Pakistan, China’s “all-weather friend,” Jacob reports (Chap. 5) China
has supplied it with billions of dollars of loans, sold it billions of dollars of
weapons, and offered Islamabad precious diplomatic support, though not
all of this is directly related to the MSRI or the China-Pakistan Economic
Corridor (CPEC), which connects the MSRI and the SREB. Turning to
Sri Lanka, David J. Karl (Chap. 6) writes China is funding hundreds of
millions of airport and port projects, dispatching submarines to the island
nation, and building infrastructure there. Beyond this, China’s diplomatic
and political interactions with countries such as Egypt, India, and Iran now
regularly incorporate discussions about the MSRI and ways China and
these countries can enhance their MSRI-related interactions.17
In terms of hard infrastructure, it is extremely difficult to isolate projects in South Asia that tie exclusively to the MSRI. Nevertheless, the chapters by Garver, Brewster, Jacob, Karl, and Kondapalli make manifest that
the MSRI is linked directly and indirectly to various energy, transportation, and other projects, ongoing or completed, in MSRI participant
countries such as Maldives, Pakistan, and Sri Lanka. As far as Maldives is
concerned, significant activities include a prospective bridge, which would
link the capital and the country’s international airport and for which a
Memorandum of Understanding (MoU) has been signed, as well as
China’s potential construction of roads in Male, the capital, coupled with
an upgrade of its airport. Noteworthy examples with respect to the latter
two countries include China’s allocation of $46 billion for diverse airport,
hydropower, pipeline, port, power-plant, railway, and road projects in
Pakistan, and involvement in the multi-billion dollar Colombo Port City
and Hambantota port and international airport projects in Sri Lanka.

MSRI Economic Goals and Challenges
A key goal of the MSRI is to promote China’s economic growth by
increasing its exports. Beijing expects this export boost to result from the
opening of existing or new markets (Chap. 4, Xinmin Sui); the reduction
of tariff and non-tariff barriers; the slashing of transportation costs through
improved connectivity (Palit); the vertical integration of trading activities
(Chap. 3, Brewster); increased Chinese foreign direct investment (FDI);


  CHINA’S TWENTY-FIRST CENTURY MARITIME SILK ROAD INITIATIVE...   

7

the construction of industrial parks, SEZs, and trade zones; and the
MSRI’s spurring of participant growth.18 Furthermore, the MSRI will
promote growth by helping China dispose of its excess capacity while concurrently easing industrial restructuring.19 Beyond this, Beijing feels the
infrastructure associated with the MSRI will support growth.20 First, it will
provide a foundation for China to sell more overseas.21 Second, the MSRI
will energize networks of capital, services, and people that are key to
­economic exchange.22 Third, as several writers in this volume note, the
building of hard infrastructure itself will generate prospects for Chinese
companies and sale and service openings for Chinese firms.
The MSRI also performs the function of giving China more profitable
ways to use its massive foreign currency reserves, of which the vast majority are invested in low-yielding US Treasury securities.23 One way this will
occur is that these moneys will go to Chinese financial institutions like the
SRF, AIIB, and CDB, mentioned above, which, in turn, will lend money
for MSRI projects. These institutions (China) will not only make money
from these loans, but the loans will also increase the likelihood that MSRI
projects will be completed.24 On a related note, the MSRI will contribute
to Beijing’s effort to internationalize the RMB because MSRI countries
and companies (including Chinese ones) are expected to increase their
usage of it for debt issuances, swaps, settlement, credit insurance, currency
speculation, trade pricing, investment, and trade financing as a way to
hedge and reduce transaction costs.25
At the non-governmental level, Chinese businesses see new opportunities of all kinds flowing from the MSRI. They feel the MSRI will enlarge
the market for their products and services.26 In addition, they believe the
MSRI will ease access to production inputs, provide new financing sources,
bolster the ability of Chinese companies to diversify their client base, and
provide them with new opportunities to participate in consortia or joint
ventures.27 The MSRI further fits with the desire of many Chinese firms to
obtain increased opportunities for outward FDI (OFDI) to boost their
profit margins, build regional production bases and headquarters, and
gain brands, technology, and production knowledge.28
Turning to specific companies, we see Alibaba looking to build, in partnership with other public and private entities, a cross-border e-commerce
platform involving logistics, financial services, and customs clearance services to promote goods from countries and regions along the MSRI.29
Similarly, IZP Technologies plans to set up cross-border clearing and payment systems, dual-currency credit cards, and finance small and medium


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J.-M.F. BLANCHARD

enterprises and trade logistics and marketing networks.30 COFCO, the
Chinese commodity/food giant, believes the MSRI will give it greater
opportunities to build grain and agricultural product supply chains.31
CRRC Corporation Limited, a railway company and state-owned enterprise (SOE), sees exciting possibilities in terms of selling trains, building
trunk and light-rail systems, setting up overseas manufacturing, marketing
exposure and providing services.32
As Sui observes in Chap. 4, the MSRI may help China by bolstering the
economies of MSRI participants. Many of them have significant economic
problems, including poor integration with their neighbors, a lack of markets, and serious capital shortages.33 Regarding markets, China, obviously,
offers a huge one, especially for raw materials. Looking at capital, China
can make two contributions. One is that it directly will help MSRI countries develop their hard infrastructure.34 This may have multiple positive
externalities. For instance, as Jacob makes clear in his treatment of the
CPEC in Chap. 5, China’s contribution to Pakistan’s power infrastructure
is not just about boosting the latter’s energy capacity; it also is about
enhancing Pakistan’s industrial capacity which, in turn, boosts its growth
and export potential. Second, it will lend moneys for infrastructure. Third,
Chinese companies will engage in OFDI, partly through greenfield investments, and thus inject capital into host country economies. This infrastructure, ceteris paribus, will help MSRI participants boost economic
activity, spark investment by others, and fuel new kinds of economic activity. Of course, if the growth prospects of MSRI countries improve, then
China, in turn, gains new opportunities.
It will be immensely challenging to realize China’s MSRI. It could not
be otherwise given the MSRI’s size, the number of massive infrastructure
projects involved, and variation in regional financial, logistics, and transportation systems. Furthermore, Sui highlights that the MSRI will have to
develop in an environment that lacks solid, extant infrastructure and legal
institutions. On top of this, the future of the MSRI will be closely linked to
the economic situation in China and other countries. We have many ­reasons
to be positive about China even if it does not grow at the same rates as in
the past. It is far from certain, however, that other key MSRI participants in
South Asia like Pakistan will succeed in surmounting their economic problems. If not, this undoubtedly will limit the progress of the MSRI. Regarding
economics, it remains uncertain if all of the MSRI’s infrastructure projects
make economic sense, with some, for example, expressing doubt if trainbased systems really are more cost effective than ships.35 Brewster, Karl, and


  CHINA’S TWENTY-FIRST CENTURY MARITIME SILK ROAD INITIATIVE...   

9

Palit point out in their respective pieces in this book that it is open to
question if the volumes at MSRI “nodes” (e.g., ports or logistics facilities)
will be sufficient or whether MSRI facilities and pipelines will be more cost
effective or attractive than the alternatives, given domestic issues in host
countries and the existing low level of trade integration, intensity, and networking in South Asia (see Palit, Chap. 8).
A major economic issue is that the MSRI has little chance of reaching its
full potential unless India enthusiastically participates.36 Yet almost all the
contributors to this volume seem skeptical this will happen. Power, military, economic, prestige, and identity considerations and China’s close
relations with Pakistan (see Jacob, Chap. 5), coupled with the way China
has gone about promoting the MSRI, have made India quite cautious
about the project. Indeed, Delhi has been adopting various measures that
directly or indirectly counter or slow the MSRI. Examples include building
better relations with MSRI countries such as the Maldives and Sri Lanka
and active involvement in their domestic politics (see Karl, Chap. 6 and
Kondapalli, Chap. 7), launching an Indian MSRI “equivalent” (Project
Mausam), seeking better ties with extra-regional powers like Japan, building up its own naval capabilities, and so on.37 Even if the Indian government per se was on board, Indian political parties have expressed strong,
uniform concern about the project.38 Moreover, the Indian strategic community has been voicing alarmist sentiments about the end goals of China’s
MSRI, deeming it a scheme to ­balance against India, establish a “string of
pearls” (bases) that would allow it to dominate the Indian Ocean and trade
across it, and “cement Chinese influence in its near and extended neighborhood at the exclusion of other significant actors such as the US, Japan,
Russia, and India.”39
One of the largest challenges facing China with respect to the successful
implementation of the MSRI will be the actions of Chinese businesses,
which often lack adequate knowledge of the cultural, social, and environmental contexts in which they will operate abroad, do not understand the
political and credit risks they face, and are ignorant about foreign bureaucracies, legal mechanisms, and regulatory procedures, as well as local partners.40 These defects plus each firm’s own selfish interests can cause
businesses to take actions that diminish the appeal of the MSRI, disrupt
efforts to complete projects, and waste financial resources. Ensuring Chinese
companies behave in accordance with Beijing’s wishes will not be easy given
their number, the fact they will be operating far away from Beijing, and the
fact that some are SOEs and/or otherwise have political clout.


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J.-M.F. BLANCHARD

MSRI Political Goals and Challenges
Many argue that China is pursuing the MSRI to improve the security of its
sea lines of communication (SLOCS) and, relatedly, its resource (energy
and raw materials) security.41 With respect to SLOCS, the MSRI gives
China alternatives to them by establishing routes through Pakistan,
Myanmar, and Bangladesh through which commodities, energy supplies,
and other goods can flow to China.42 Of course, resource security requires
not just access, but also steps to ensure there is sufficient production of the
needed resources. In this regard, MSRI-fueled infrastructure development, MSRI-spurred investment (by Chinese firms and others) in oil, gas, and
mines, and cooperation with MSRI host countries, should be quite helpful
as they will expedite certain resource projects and lubricate the completion
of projects that otherwise might not have been initiated/completed.
Some believe the MSRI will facilitate China’s efforts to strengthen its
relationships with MSRI participants and bolster its ties with other countries.43 One reason for this is that the MSRI will promote a multitude of
flows that could potentially bind countries together.44 A second is that
MSRI loans, infrastructure, and the like have the potential to boost
China’s soft power by showing it to be an economic and political leader
and benefactor.45 This is especially salient in the case of countries like
Myanmar, Pakistan, and Sri Lanka, which lack other avenues for aid, capital, equipment, technology, or weapons. One Sri Lankan official put it
thus: “Who else is going to bring us money, given the tight conditions in
the West?”46 A third is that the MSRI offers a counterpoint to what some
countries see as China’s recent military assertiveness and helps Beijing
“‘convince countries … it is in their interests to accept China as the alpha
power in the continent.’”47 Chinese leaders and elites have underscored
repeatedly the potential of the MSRI to enhance China’s image and foster
more cooperative relations with other countries.48
Many writers, including Garver (Chap. 2) and Kondapalli (Chap. 7),
feel China backs the MSRI in order to achieve a role commensurate with
its status and rising global power.49 After all, an important aspect of
Chinese President Xi’s “Chinese dream” of the “rejuvenation of the
Chinese nation,” is China assuming a leadership role.50 There are those
who assert the MSRI has more nefarious connotations, including helping
China break American hegemony and seize the Eurasian heartland.51
Furthermore, the MSRI putatively will bind surrounding countries and
regions more closely to China.52 Finally, the MSRI will allegedly help


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11

China diminish existing financial institutions like the Asian Development
Bank (ABD) and the World Bank and undermine the standards that these
and other Western-created and/or -dominated institutions advocate.53
China refutes those who see the MSRI as having malevolent aims. It
stresses that the MSRI, MSRI-associated financing institutions, and MSRI
principles are not closed/exclusionary.54 Painting it differently, Chinese
representatives underline the MSRI is “not a solo but a symphony” and
that China’s initiatives are “open to all countries wherever they are” “‘as
long as they accept the spirit of the initiatives.’”55 Palit (Chap. 8) takes a
neutral stance, but observes that China’s creation of China-centric insti­
tutions and concurrent neglect of non-Chinese regional organizations
raises suspicions.
There are those who argue that the MSRI is a way for China to leverage
its economic capabilities to realize strategic objectives.56 Beijing, though,
has said repeatedly it is not going to leverage its economic might for political ends and that MSRI-related financial institutions do not represent anything akin to the Marshall Plan.57 Similarly, Sui (Chap. 4) argues the MSRI
is a recognition of the fact that contemporary world politics is about economics (which Sui terms a world of “geo-polionomics”) and that it does
not constitute a nefarious scheme to empower China or ensnare its neighbors, but is rather a way to elevate the situation of those neighbors, which
will help China economically as well as politically. Yet, even if the MSRI is
not a Marshall Plan involving any overt strategic goals, it can help China
achieve such aims indirectly. After all, China will be the key player in MSRI
integration, hard and soft infrastructure- and institution-building, and
exchange initiatives.58 Beyond these political benefits, the MSRI should
give China some measure of agenda-setting power and deference since it
is and will be its leader. Finally, the MSRI will afford Chinese public and
private actors diverse opportunities to penetrate the political and economic borders of MSRI participants.
According to some, the MSRI has some country-specific political
objectives. For example, Garver (Chap. 2), Brewster (Chap. 3), and Jacob
(Chap. 5) see the CPEC and the MSRI, of which CPEC is a part, affecting the ability of Pakistan (and its neighbor Afghanistan) to deal with a
myriad of economic issues which, in turn, can stabilize China’s long-time
ally. Furthermore, these schemes can transform the Sino-Pakistan relationship from one that has been almost entirely military to one that does
a better job of serving China’s economic interests. In the case of Maldives,
China is attempting to solidify its friendship with a country that is strategically placed (Kondapalli, Chap. 7).


12  

J.-M.F. BLANCHARD

The MSRI’s realization will require China to address numerous political
challenges. The large number of MSRI actors and the plan’s scope and
scale alone will present daunting hurdles. Paradoxically, a successful MSRI
will have the potential to create political challenges for China. First, some
companies and workers in MSRI participant countries will suffer costs
from greater inflows of Chinese goods or firms, or increased competition
in third markets. These costs, in turn, could generate political friction.
Second, some MSRI participants will be concerned about their trade deficits with China, and Chinese pressure on their industries. Jacob (Chap. 7)
writes, illuminatingly, “in the case of the Sino-Indian economic relationship … bonhomie evaporated as soon as India’s trade surpluses turned
into persistent trade deficits with China.” Third, resource-rich MSRI
countries will worry about becoming excessively dependent on resource
exports. Fourth, MSRI participants will fear domination as they become
economically bound to China.59 Fifth, a successful MSRI will open new
routes for crime (e.g., drug smuggling and human trafficking), the spread
of fundamentalism and separatism, and environmental degradation.
Another political hurdle to the MSRI’s successful realization is the fact
China will have to obtain the approval of countries with vastly different or
poorly developed political, regulatory, and legal systems.60 In some cases,
it will be quite daunting to get countries not only to buy into, but also to
become meaningful contributors to the MSRI because of security worries,
identity and prestige considerations, territorial and maritime quarrels,
domestic political issues, or other factors.61 Indeed, some countries along
the MSRI may take actions that affect its progress. To illustrate, as detailed
above, China’s progress in expanding into the Indian Ocean Region
(IOR) and advancing the MSRI have pushed India to bolster its relations
with MSRI participants like Sri Lanka, to build up its navy, to expand
resource exploitation activities, to endeavor to enhance regional institutions, and to increase its maritime surveillance activities.
Implementing the MSRI will be formidable even if all embrace the
project. After all, as various contributors comment, the MSRI will involve
countries that have boundary conflicts with each other and China; have
unstable leaderships, governments, and policies; and possess limited
technocratic capacities. For example, Pakistan is confronting a severe
­
­separatist insurgency in Baluchistan that is creating and will engender
future problems for the implementation of the MSRI, as noted by many
contributors to this book. In Sri Lanka, leadership change has brought


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13

about project delays and cancellations, and, to some extent, changed the
economic atmosphere between Sri Lanka and China.62 While Myanmar is
not directly part of the MSRI in South Asia, the MSRI in its entirety
includes Myanmar and infrastructure in Myanmar will link to China’s MSRI
in South Asia. Thus, what happens in Myanmar has potential ramifications for
the MSRI in South Asia. In this vein, it is worth highlighting that leadership
turnover there, infrastructure construction problems, and border and ethnic
minority issues have disrupted investment ties between Myanmar and China
and are impeding the completion of certain projects.63
One obstacle confronting the MSRI is the coordination of Chinese
companies. Many take it for granted that Beijing “can completely override
enterprises in making decisions” and force them to participate consistently,
enthusiastically, and substantively in the implementation of the MSRI. Yet
this is not necessarily the case. Chinese firms, like businesses throughout
the world, will be cautious because of potential low investment returns, a
lack of host-country legal safeguards, and unfavorable commercial environments as well as sundry political and other risks.64 If Chinese firms are
too cautious, though, then it will be difficult for the MSRI to reach its full
potential. It will be a political challenge for Beijing to gain full control
over the investment and operating decisions of Chinese companies, especially in the case of SOEs, which have a variety of tools that allow them to
influence policy.
A related problem will be the misbehavior of Chinese companies.
These firms will often be inattentive to the political dynamics in the
­countries where they invest or operate and/or may not be sufficiently
conscientious with regard to the negative externalities that flow from
their mining projects, infrastructure building, energy-extraction activities, port and utility construction, and so on. All of this has the potential
to, among other outcomes, prevent projects from receiving approval,
stop projects midstream, and to turn MSRI participants or their publics
against the MSRI or select initiatives. Such dynamics have been seen in
the case of non-MSRI-­participant states like Cameroon and Peru and
MSRI participants such as Myanmar.65 Beijing is well aware of these
potential problems. Illustrating this, in February 2015 Vice Premier
Zhang said at a conference that it was important for Chinese companies
to protect the environment and be aware of Corporate Social
Responsibility.66 Sui mentions in Chap. 4 that the Chinese government is
working to encourage its companies to behave in order to minimize the
risk of a domestic political backlash in partner countries.


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