China's Belt and Road Initiative

FASKIANOS: Good afternoon from New York and welcome to the CFR Fall 2019 Academic Conference Call Series. I’m Irina Faskianos, vice president of the National Program and Outreach here at CFR. Today’s call is on the record and the audio and transcript will be available on our website, CFR.org/academic. As always, CFR takes no institutional positions on matters of policy.

Dr. Economy is the C.V. Starr senior fellow and director for Asia studies here at CFR, and a distinguished visiting fellow at Stanford University’s Hoover Institution. She’s an acclaimed author and expert on Chinese domestic and foreign policy, writing on topics ranging from China’s environmental challenges to its role in global governance. In June 2018, Dr. Economy was named one of the ten names that matter on China policy by Politico magazine. Her recent book was just released in paperback. It’s entitled The Third Revolution: Xi Jinping and the New Chinese State. And she’s also the author of By All Means Necessary: How China’s Resource Quest is Changing the World with Michael Levi, and The River Runs Black: The Environmental Challenge to China’s Future. She also authors on CFR’s Asia Program blog, Asia Unbound, about topics involving China and Asia. So I commend that blog to all of you.

Liz, thanks very much for being with us today. I thought we could begin by having you talk about Chinese President Xi Jinping—I can’t—I need a little more coffee this morning—and what he’s trying to do in the world, how does he see China’s—what role does China play?

ECONOMY: Thanks so much, Irina. It’s really a pleasure to be able to do this call and to engage with all the students. I’m really looking forward to the question and answer time.

You know, to begin with, I think really when we look at this era of Xi Jinping, which began in 2012 with his election as general secretary of the Communist Party, I think that one of the most striking changes that we’ve seen in China really has been the shift in the country’s foreign policy. We tend to focus a lot on what’s going on inside China, but I think when you look at the transformation that’s occurred in Chinese foreign policy from one that was really focused on maintaining a low profile. You know, Deng Xiaoping and his successors, with Jiang Zemin and Hu Jintao, really wanted a calm external environment so that they could focus on domestic issues, on improving the standard of living for the Chinese people at home.

But Xi Jinping really has shifted to a foreign policy that is centered on China playing a much larger role on the global stage. And if you look at his speeches over the past several years, you’ll see that he often talks about China leading the reform of global governance, leading on globalization, leading on climate change. And this leadership is a critical element of his big notion of the great rejuvenation of the Chinese nation. You know, some of that rejuvenation has to do with strengthening China internally. For example, he wants to have a more robust Communist Party at the forefront of the political system. He wants an innovative and competitive Chinese economy, and a strong military. But it really is very much about China reclaiming a place of centrality on the global stage.

Broadly speaking, I think Xi’s foreign policy initiatives fall into three categories. The first is enhancing Chinese sovereignty claims. For Xi Jinping, you cannot have the rejuvenation of the great Chinese nation without a reunified China. So we’ve seen him take a number of more assertive measures, adopted a number of policies that are designed to assert mainland Chinese sovereignty over the South China Sea, Hong Kong, and Taiwan. So one objective in this rejuvenation narrative is a reunified China.

The second, and what I’m going to focus my remarks on this afternoon, is the Belt and Road Initiative. And I think Belt and Road Initiative is emblematic of Xi Jinping’s desire to expand Chinese influence globally. You know its economic influence, its political influence, and its military influence. There are other mechanisms that he’s also adopted, but I think this is really the centerpiece of China’s global expansion.

And the third, as he puts it, is his desire to lead in the reform of global governance. This means ensuring that Chinses values, priorities, concerns are better reflected in international norms and institutions, like the United Nations, for example. I think you can see this if you look at issues around internet governance, human rights, development, finance. China wants to have the way that it looks at the world, right, reflected in the international institutions. It wants its values to be upfront and center, and to, you know, sit alongside or compete with those that have sort of underpinned the traditional liberal international economic order.

So that’s a bit of context. I’m happy to say more on these broader elements of Chinese foreign policy. But let me just target my remarks for my remaining five or so minutes on the Belt and Road Initiative. So the Belt and Road Initiative, or the One Belt, One Road initiative, which it—or, One Belt, One Road, which was the way it was originally laid out by Xi Jinping, was announced in 2013 in two speeches by Xi, the first in Kazakhstan and the second in Indonesia. In its initial conception, it had several different purposes. The first was to export Chinese overcapacity. As China’s own infrastructure needs slowed, for example, it wanted and needed to find opportunities globally for all of the industries tied into the infrastructure business. This includes things like steel and construction, energy, transportation.

At the same time, Chinese leaders both recognized and wanted to contribute to the enormous infrastructure needs globally that were not being met. You know, there’s a spending deficit of as much as $4-5 trillion per year globally in terms of infrastructure needs. So China saw itself as playing a really important role in helping to contribute to meet some of these needs.

Second, China wanted to connect some of these interior, poorer regions of its own country to external markets. One thing that’s often not appreciated by the Belt and Road is that about a third of Belt and Road projects and spending actually take place inside China. So connecting, you know, parts of Xinjiang or Hunan, you know, to the external markets is a central element of Chinese thinking around the Belt and Road as well.

A third, the Belt and Road spoke to issues that had been raised by strategic thinkers in China, you know, dating back to at least 2004, where military officials as well as some think tank scholars argued that China should look west to expand its influence, because the United States already has such a strong foothold in East and Southeast Asia, right? A lot of U.S. allies, such as Japan, Korea, Thailand, the Philippines, our partner Singapore, are located in East and Southeast Asia. So China—it would be very difficult for China to compete in that region, instead it should look west.

And finally, I think, the Belt and Road captured the essence of the rejuvenation narrative because at the outset, again, it related to the old silk road and maritime spice routes—you know, connecting China through Asia, the Middle East, Europe, and out to Africa. So it fitted very nicely with that conception that Xi Jinping was developing.

Over the past six years, however, the Belt and Road has evolved and morphed into something much more expansive than its original aims. You know, now all countries in the world are welcome to participate in the Belt and Road. It’s no longer just about those countries that are along the old silk road and maritime spice routes. In addition to the sort of land and maritime quarters, there’s a digital Belt and Road, which is designed to connect China through fiber optic cables, satellite systems, and e-commerce. There’s a polar belt to connect China through to Europe more quickly.

There’s a security component to the Belt and Road. You know, according to the People’s Liberation Army 2019 national defense white paper, part of its mission is to develop a far-seas forces with overseas logistical possibilities. You know, China now controls or has a controlling stake in more than 75 ports in 46 countries. And in July of 2017, it established its very first overseas logistics base in Djibouti. Pakistan and Cambodia will be the next two locations for Chinese bases.

And, again, this represents a very fundamental shift in Chinese thinking. You know, for decades China would say it would never have overseas bases, because this would be seen as an infringement of other countries’ sovereignty. But now Chinese scholars tend to argue that Chinese bases are different from American bases, because they’re going to serve defensive purposes as opposed to the hegemonic policies of the United States.

And I think it’s important to recognize that there is a political component to the Belt and Road. Xi Jinping has stated that China could provide a development model that would serve as an alternative to that of Western liberal democracies for countries that were not interested in following that path. And it’s not about exporting Chinese Communist Party, but it is about putting infrastructure development as a priority for development.

But also, on the political side, you know, China held a two-week cybersecurity seminary for eighteen Belt and Road countries, explaining to them how to manage the internet, how to do real-time monitoring. The, you know, Huawei, a well-known Chinese company—technology company—has provided not only the technology for countries but also training to officials in countries like Namibia and Uganda on how to track political opponents, and journalists, and bloggers. It’s doing political capacity-building in places like Tanzania.

So I think it’s important to recognize that the Belt and Road has shifted significantly from its original conception to include a broad array of additional security and political initiatives. How successful has the Belt and the Road been? It’s really difficult to say at this point. You can, I think, point to a few significant successes. Support in Greece and Georgia, for example, I think by any measure have been extremely successful. The World Bank has produced a study that has said, you know, if the ambitions of the Belt and Road are fully realized it could help lift thirty-two million people out of poverty, boost global trade by more than 6 percent, and overall average global income by 2.9 percent. I mean, that would be extraordinary.

But let me conclude just by pointing out some of the limitations that have emerged over the past six years or so, since the Belt and Road was first announced. Really, I’ll just pick five. You know, first would be the lack of transparency in the tendering of bids and project development. Lack of good social impact, environmental impact assessments, engagement of the publics involved in this decision-making process, concerns over corruption.

You know, we’ve seen a number of pretty significant corruption cases, for example, in places like Malaysia and the Maldives, you know, involving money laundering, and kickbacks, and inflated prices. And, you know, it takes two partners to be corrupt, right? It’s not just China being corrupt. It’s also the host country. But the fact that the business is conducted in a way that is often not transparent, you know, enables this type of corruption to flourish. So I think that’s one very significant concern around many of these deals, and a source of some significant social protest in a lot of Belt and Road countries.

Second is the potential for China to take control of strategic assets and sort of long-term, you know, ninety-nine-year leases on, you know, 20 percent of Cambodia’s coastline, at this point. Or when countries can’t repay their debts, for example. Ecuador now has to turn over 80 percent of the oil it produced to China to pay off its debts from a large dam that China funded. So that tradeoff between what might be considered strategic assets of countries, you know, in exchange for the development of some of these Belt and Road projects is a growing concern in some countries.

The environmental issues I hinted at. One of the striking things about the Belt and Road project is despite its stated effort to be green in its implementation, China is exporting somewhere between one (hundred) and two hundred coal-fired power plants. Kenya got its first-ever coal-fired power plant in an environmentally sensitive area as a result of Belt and Road. But it has now stepped back from that project. Pakistan similarly went from a country that had very little in the way of coal-fired power plants to a significant portion of its energy resources coming from coal, now again taking a step back from some of those planned projects. So, you know, I think the environmental issue and, again, the lack of good environmental impact assessment is something else that China has to address.

And then I think the labor issue has proved to be a significant one in many Belt and Road projects, because China often exports its labor to do these projects. So in many countries, the local populations aren’t getting all of the benefits that they could from these projects because much of the work is being done by Chinese. So, you know, a study came out and demonstrated that in Belt and Road projects 89 percent of the construction is being done by Chinese, about 7 ½ percent by local firms, and about 3 ½ percent by foreign firms. This compares to non-Belt and Road projects in which about 29 percent globally of projects are being done by Chinese firms, 41 percent by local firms, and 30 percent by multinational. So you can see the really significant difference there, and why in some countries this is a problem.

And then finally, there is the issue that the United States has been discussed quite a bit, and that is rapidly rising debt, the debt trap. And you know, the extent to which China is blamed for this, or—you know, certainly, frankly, I don’t think that China is doing this deliberately. But I think there has been a lack of due diligence in many cases, looking at the country’s ability to repay the loans that they are undertaking from these Belt and Road projects. So Pakistan, Djibouti, Sri Lanka, Myanmar, many countries are now reassessing the terms under which they’ve agreed to projects, scaling back projects, because they are concerned about mounting debt.

So the last thing I’ll say—because I’ve run a bit longer than I should—is that there is a reboot underway of the Belt and Road project. Xi Jinping held a second Belt and Road forum this past April. And in—you know, has a stated desire, to address, frankly, all of those issues that I just raised, you know, on the quality of the project, doing a better job scrutinizing the sort of economic terms, better on transparency, and also sort of increasing the role of a third party. So bringing other countries and other multinationals more into the process. I think it remains to be seen how much of these pledges, and these promises, and sort of best intentions are actually realized. It’s still early days. But in any case, it does serve as a recognition or serve as evidence that China has recognized that perhaps it needs to do things a little bit differently as the Belt and Road moves forward.

So I’ll stop there. And, again, I welcome questions on, you know, Belt and Road. I welcome questions on the sort of broader issues that I raised earlier around sovereignty and norms. You know, I’m happy to talk about the NBA and China. So whatever you’re interested in, I welcome your questions.

FASKIANOS: Wonderful. Thanks so much, Liz, for that insightful analysis. Let’s open it up to students for questions.

OPERATOR: Thank you. At this time we will open the floor for questions.

(Gives queuing instructions.)

Our first question comes from Kentucky Wesleyan College.

Q: Good morning. This is Morton Holbrook at Kentucky Wesleyan College. Nice to connect with you again, Liz, after so many years.

My question picks up on the readings today. Given China’s outstanding developments—outstanding achievements in economic development since 1979, many of them tied to development of a market economy, why has Xi Jinping taken what appears to be a step backward to reinvigorate the state enterprises that were such a huge drag on the economy previously? And a follow-on, doesn’t this risk threatening rather than strengthening the legitimacy of party rule? Thank you, Liz.

ECONOMY: Sure. Thanks for that really excellent question.

So, yes. One of the striking things about the Xi era has been the extent to which he has sort of reasserted the role of the party and the state in the economy and in society and enhanced the role of state-owned enterprises. I think there was some thought back in 2013, the Third Plenum of the Eighteenth Party Congress with China unrolled or unveiled a fairly significant economic reform program that China—this was going to be the era—a new push for economic reform, greater liberalization of the economy, increased access for multinationals, et cetera. But I think what a lot of people failed to realize, that in the document that was produced from that major meeting it said, yes, that the market would be a decisive force, but also that the state would retain a commanding role in the economy.

You know, frankly, I think that the decision to enhance the role of the state-owned enterprise and, in fact, to increase the role of the party in private firms, right, by enhancing the role of party committees in private firms and in joint ventures—so enabling these party committees to, you know, try to tell private firms and joint ventures what they should be doing, where they should be investing—these are roles that they had never played previously. I think it’s a lot about Xi Jinping’s own desire for control, and control over the market. When you have the party committees, when you state-owned enterprises, they are in effect arms of the Chinese state. And Xi Jinping can direct them, to some extent, right?

So if you do want a certain company to invest in a certain place, you can achieve that. But you can’t achieve that with private—fully private enterprises. So I think as he looked at the state of the Chinese economy, as he looked at the state of corruption in China, I think he felt that he wanted to assert greater control, you know, over the political system and over the Chinese economy. And again, that extends not only to Chinese firms at this point but also to multinationals. And we’re going to see with the imposition of the social credit system on multinationals that they’re going to be responsible for responding to many, many demands on the part of the Chinese government. So, you know, frankly speaking, I think it speaks very much to Xi’s fear of the lack of control that arises when you allow the market to develop fully.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from Washington & Jefferson College.

Q: Yes. Thank you. Excuse me. My name is Robert Dodge. I am a professor at Washington & Jefferson College.

My question deals with the Russian Federation’s role in this Belt and Road, particularly in Eurasia. It seems that under the Putin administration, since the beginning of the twenty-first century, Russia has been putting a great deal of effort and resources into its infrastructure in its Pacific theater, both economically, particularly. And is this to—from the standpoint of Russia, do you believe that this is a way to hold the Chinese effort at bay, or to become a more cooperative member—not an equal one, necessarily, but a friendly one with respect to Beijing?

ECONOMY: That’s a really interesting question. You know, my—frankly, my read on what’s going on with Russia, for example, with its Eurasian economic union is that it has basically agreed to, you know, integrate, but in effect to a larger extent, subsume its efforts within the Belt and Road. So there was a fairly explicit decision made that it would be a cooperative effort between the two, rather than competitive. And I think that fits in well more broadly with the way that the Russia-China relationship has been development. I think they are seeking—you can see, you know, the largest joint military exercises ever. You can see them cooperate in very subtle ways where, you know, China doesn’t criticize Russia for what it does in Ukraine and Crimea. Russia doesn’t criticize China for what it’s doing in the South China Sea. You know, China’s playing an active role—very active role economically in the Middle East. Russia has this sort of security portfolio in the Middle East.

So I see a lot of complementarity. You know, Russia has now become China’s largest source of oil. So I think the two countries are trying to find a sort of—they’re finding common ground, in many respects, frankly, in opposition to the United States. But I think, you know, that doesn’t mean that they are completely aligned. I think in areas like the Arctic there’s room for differences. Russia has actually demonstrated it does not have an interest in having China become more powerful in the, you know, Arctic discussions—a role that China does seek. But overall, I think we see the two countries trying to work together in pretty significant ways. Ramping up their partnership, I would say. You know, just as a final note, I will say that Xi Jinping has publicly—you can find it on YouTube if you like—said that Putin is his best friend in the international arena.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from Washington and Lee University.

Q: Hi. My name is Lauren Allen (sp) from Washington and Lee University.

And my question is what is the relationship between the growing oppression of the Uighur people and China’s economic expansion efforts via the Belt and Road Initiative?

ECONOMY: So I think if you look back to Jiang Zemin in the late 1990s, 1999, and the sort of effort to go west, there was an open west campaign. There was a sense that the coastal provinces needed to do a better job of reaching out to the western provinces, certainly including Xinjiang, not only to exploit their natural resources but also to develop the provinces, to integrate them more fully into the sort of majority Han area of China. You know, they flooded the region with Han Chinese so that, you know, the population almost is fifty-fifty at this point. So there’s been a long history of sort of economic—thinking about economic development as a mechanism for integrating Xinjiang and the Uighurs into more traditionally Han parts of the country.

As far as the Belt and Road is concerned, yeah, Xinjiang is a central point for the Belt and Road. But it doesn’t appear, at least to me, that the sort of political and security elements of what China is doing, what Beijing is doing in Xinjiang, have any relationship to the Belt and Road, at least in terms of benefits to the people of Xinjiang—to the Uighurs in Xinjiang, because obviously what’s happening in Xinjiang politically and in terms of the—you know, they basically developed a police state. So, you know, Xinjiang is, again, central for the transport of Chinese goods through Xinjiang, you know, into Central Asia, through to Europe, et cetera. But in terms of the sort of integration of the Uighurs into the Belt and Road to receive the benefit, I’m not seeing much of that.

It’s also plausible, although I don’t think this the original intention, that the Belt and Road, you know, going to Xinjiang and then, again, going into Central Asia, and other parts of the different corridors, you know, is a way of tempering potential criticism by Muslim-majority countries of Chinese practices in Xinjiang, because we have not seen much criticism. Most of the criticism has come from Europe, the United States, some other countries in Asia. But in any case, I see the two as relatively divorced, quite frankly.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question will come from Georgetown University.

Q: My name is Do-muk Kim (ph), a master’s student in Georgetown Security Studies Program.

What do you think is the main difference between the U.S. international development plans back in the early Cold War era or Japanese one since 1980s and Chinese Belt and Road?

ECONOMY: That’s a very big—(laughs)—question. I mean, I think one of the primary differences—I mean, to some extent certainly the Americans, maybe a lesser extent the Japanese—but the Americans and the Chinese I think have come to share a sense of—a broad sense of development around, you know, not only the economics, but politics and security, as I—as I outlined. So I think there has been in U.S. development to some extent always a sense of values. Sort of promotion of democracy has often accompanied U.S. development. And you know, to a lesser extent probably the security side.

But I think the main difference, frankly, is the role of the state. And, you know, U.S. development is done overwhelmingly through private companies. And so if you look at, for example, U.S. engagement in Africa today, the U.S. is a larger investor in African than China is, which I think will shock many people. (Laughs.) You know, Japan is a larger investor in Southeast Asia than China is. But because of the role of the state, because of the sense of a grand-scale project where, you know, not only the financing but much of the—many of the companies engaged in Belt and Road projects are state-owned companies, although certainly not all, there is a much stronger role for the state in the development process.

And I—you know, if I’m 100 percent honest here, which I generally am—(laughs)—I would say, you know, I think governance standards have tended to be higher in the U.S. and in Japanese investment than in Chinese investment. And Irina mentioned my second book that I wrote with Michael Levi, By All Means Necessary, and that was looking at a Chinese resource quest and comparing it to other countries. And by and large, whether you’re talking to countries in Africa, or Latin America, or Southeast Asia, they will say that Chinese investment overall tends to be done at a much lower level of governance, environmental, labor, and transparency standards than by other countries. So I think there are a couple of critical differences. But I do think that some elements of it certainly are shared along the lines of the values promotion and the economics.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from Fordham University.

Q: Hi. This is Trish Carson. I’m studying international political economy and development at Fordham University.

And I have been studying BRI in Africa in particular. So we see that a lot of—we see a lot of infrastructure projects happening around African developing countries, like in Ethiopia. I think the infrastructure that they’re building there is great, but it’s also creating a lot of debt, debt to China as well. And then we see more extreme case in Angola, which sounded a lot like how you described Ecuador, where they are paying off their debt in oil. And so they can’t grow that revenue from their oil exports. And so I was just wondering, overall do you see BRI projects having more of a positive or negative impact on economic growth in African developing countries?

ECONOMY: So I think—let me—let me say, I think the hopeful scenario is that in fact over time—(laughs)—that there will be a positive impact. And I think that is sort of the point of the World Bank report. But in order for that to happen, the project has to be undertaken in different ways, right? And so that—the really—the key question at this point is whether countries with weak capacity—you know, different countries have different state capacity. You know, a country like Malaysia, you know, has fairly strong state capacity, a country like Djibouti much less to sort of evaluate the risks and the rewards, and to, you know, to do its own environmental and other kind of, you know, labor standard assessments of projects.

So, you know, the question is, is China, right, as it’s promising now, going to turn the way that it does business around? You know, sometimes it will—it is willing to renegotiate. Sometimes it, you know, forgive loans. That could provide a new starting point for some of these countries in their development process with China. You know, if I were forced to make an assessment of whether overall Belt and Road projects have been economically beneficial, have achieved the types of benefits that one could have imagined, I would say no. But I think you can hold out hope that China will turn itself around in the way that it’s doing business.

And I think, look, there’s also responsibility on the part of the rest of the world. You know, United States came out very early on criticizing Belt and Road. It took a lot of flak for that, you know, because we were criticizing without have any sort of alternative. But in fact, look, you know, we were right. We, being the United States. We were right to say, look, sort of the debt financing is an issue. This is a problem for a lot of countries. Wake up, everybody. And now we’ve started to put forward a response as well. A little bit late, but not inconsequential. And other countries, like Japan and the European Union, are becoming far more engaged in their own regions in particular, but also in Africa, in competing with Belt and Road projects but offering, in most cases, greater transparency, better environmental standards, et cetera.

So, you know, all of that I think has the potential to force China to up its game, and to offer better alternatives for many of these countries that desperately want and need infrastructure. But, you know, in a way that it’s being done, you know, may never be able to pay off some of these loans. So, complicated question.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from UC Berkeley.

Q: Hi, Dr. Economy. This is Paul Chen, one of the term members here.

Quick question on kind of what do you think kind of the new world order can look like? You know, we all know businesspeople like Lee Kai-Fu have been discussing the potential bifurcation of the world into two spheres of influence. One that would be led by U.S. in the developed economic bloc, the other one led by China in the developing economy bloc, given the, you know, different business practices that are applicable between a wealthy country and developing country. How do you assess this possible new world order? Thank you.

ECONOMY: So, right, the idea of a bifurcated global order, I think you have to think about it in a couple different ways. So certainly there is the political element. There is the technological element. How are we decoupling? And you know, there is the—you know, the Huawei, you know, 5G, BeiDou satellite system, Alibaba e-commerce system. I think the digital Belt and Road, you know, does have the potential both technologically—but potentially also politically—to develop sort of two different spheres. You know, one that is dominated not only by Chinese technology, but in a way that also transfers some set of values—has a value proposition attached to it. I mentioned the sort of cybersecurity training seminar for eighteen Belt and Road countries on how to manage the internet, right? How to control dissent. In Tanzania they’re learning how to control civil society, right? How do you track, you know, journalists and bloggers?

So I think that potential does exist. I don’t want to be too alarmist about it. I don’t think it’s necessarily a developing country-developed country bifurcation. You know, there are developing country democracies that are not going to go down this path. But I do think that there is a challenge inherent in when China is transferring not only technology but also the capabilities to control populations through that technology, then I—then I do see a more significant sort of potential bifurcation. And, of course, the development of bases in certain countries, like Cambodia, Pakistan, countries that are already, you know, politically potentially more closely aligned to China, becoming much more economically aligned to China, and then also aligned in a security sense as well. So I don’t think it’s a potential—it’s not foreordained. But I think that it’s not sort of impossible.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from Oberlin College.

Q: Hi. My name is Sisop Lee. I’m a politics major at Oberlin College.

My question concerns the successful development of 5G technology. Do you by any chance consider the successful development of 5G technology as an influential factor that can push the traditional U.S. allies in Northeast Asia, such as South Korea and China, closer to China, and change the dynamics of Northeast Asia?

ECONOMY: Right. So I think it’s—you know, we’re clearly seeing this issue of 5G and Huawei, and that link between economic and—economic to national security being played out in real time. It’s important to remember that other countries, Australia and Japan for example, have already, without U.S. influence at all, said that they are not going to have Huawei, sort of Chinese 5G technology, in their economy, right? Not just in their core, but not in their economies at all. And so, you know, it shouldn’t be viewed as simply a binary U.S.-China kind of 5G war, as I think is often portrayed. Other countries are just much quieter about the decision that they’ve already made.

But, yes, I think—you know, look at the debate ongoing in New Zealand, in the U.K., clearly trying to figure out they’re members of the, you know, Five Eyes, right, our closest intelligence sharing partners. But, you know, many people in both those countries believe that Huawei offers an excellent, you know, sort of opportunity—economic opportunity. The cheapest, you know, among the best technology in 5G. Why shouldn’t they use it, particularly—they argue—if we don’t put it in our core in ways that would affect national security concerns? The U.S. has a different perspective, that you can’t necessarily separate out the core from the periphery, or that the risk in any sense is—sorry—the risk is too great. But these are very real debates that, you know, could have profound implications for our relationship with our allies, absolutely.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from Savannah State University.

Q: Yeah. This is Edoh Agbehonou. I teach political science courses here at Savannah State.

I just wanted to ask a question about the political implication of the Belt and Road Initiative. So if you look at it, the end of the Cold War, many African country have developed very closer relationship to the United States than they have with China. But with Belt and Road Initiative, China has been involved in Africa ever than before. In 2018, when the United States went to have—declare Jerusalem as the capital of Israel, many African—almost every African country have voted against the United States, except one country, Togo, who—(inaudible)—for U.S. to move forward with Jerusalem as the capital of Israel. Do you think because of the closeness to the East, especially to China—

FASKIANOS: Excuse me. Can you get to your question? Can you get to your question? We have about twenty still in queue. So just if you could end with a question, that would be great.

Q: Yeah. Do you think, because of the closeness of China to African country now, have impacted the vote in the U.N. General Assembly when it comes to Jerusalem as the capital that the U.S. requested?

ECONOMY: You know, I’m sorry, I couldn’t understand. I was following you all the way up until the actual question. Could you just—what exactly is the question? I’m sorry. It’s hard to hear.

Q: Yeah. Do you think that the closeness of many African countries to China now, due to the infrastructure that China is developing in many African countries, have some impact on the no votes many Africans have on Jerusalem being the capital of Israel?

ECONOMY: Oh, I see. Oh. So the question is whether this one decision by the Trump administration around moving the capital of Israel—moving, sorry, the embassy to Jerusalem has shaped the opportunity, has helped China in terms of developing better relations with African countries? Is that the—

Q: That’s correct, mmm hmm.

ECONOMY: OK. Well, I would guess probably not, that in fact there are many issues on which African countries tend to side with China against the United States. I think this is probably one of just, you know, many. (Laughs.) And so I think it may be part of a broader pattern, where developing countries, other countries find themselves closely—their interests or their views seem to be more closely aligned with those of China, sometimes, than with those of the United States. So I think maybe it’s part of a larger cluster, but I don’t think particular issue has that enormous an impact on the relationship between China and the—and Africa, which is, after all, a relationship that, you know, goes back to the 1950s and 1960s. China has been deeply engaged in Africa for decades. And so I think, you know, there’s—this, again, I think is maybe one part, but not necessarily an inflection point, or some very significant issue.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from the University of Minnesota.

Q: This is Tanisha Fazal from the University of Minnesota. Thanks for taking the time to speak with us today.

You mentioned at the beginning of your remarks that the Chinese leadership sees BRI as a way of increasing Chinese influence around the world. And I wonder if you could give us a sense of how the Chinese leadership might grade themselves on this score. How successful do they see themselves having been in terms of expanding Chinese influence, and what limitations—what sort of maybe unintended consequences or limitations they might see in this regard.

ECONOMY: Sure. So I would—I would imagine that the Chinese leadership sees itself overall as extremely successful at this point in time. You know, I think one thing I didn’t really talk about is how effective the Chinese media has been in establishing partnerships in many of the Belt and Road countries so that, you know, Xinhua now provides free news service globally, right? Or in Kenya, StarTimes has provided the, you know, television—the infrastructure for television. And the TV stations that are the least expensive to buy are the ones that are—to buy access to—are, you know, Kenyan and Chinese, right? And others, like the BBC and Al Jazeera, the Chinese company has priced much higher. So there are many ways in which I think the Chinese believe they are being quite effective at getting their message across, getting their narrative out there, the Chinese perspective on events. So I think they would rate themselves highly.

At the same time, I think in other ways the Chinese government has been forced to recognize that there is a lot of societal opposition to elements of the Belt and Road at this point. I mean, there are protests in virtually every single Belt and Road country. Even in ones that are, you know, classically fairly closely tied to China, like Pakistan. Pretty significant concerns around Belt and Road Initiatives that are, again, from the stake in resources, or the lack of environmental impacts, or issues around corruption. So I think there is a real recognition—and this was reflected in Xi Jinping’s much more muted—(laughs)—second Belt and Road sort of conference in 2019, as opposed to the very triumphal one in 2017—much more muted Belt and Road conference, where the emphasis really was on how we’re going to do things differently moving forward.

But overall, I think they would—they would argue they have laid the tracks, laid the tracks, laid the groundwork for a really extraordinary increase in the infrastructure of influence moving forward. And that’s true whether we’re talking about the security, or the political, or the economic influence.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from Georgetown University.

Q: Hello. This is Jill Dougherty with a question basically from our students.

I was very intrigued, and this is a great briefing, by the way, with your emphasis on the political purpose of Belt and Road, and China as a different development model. And we were wondering if, let’s say, if China is to replace the liberal democratic order, what are its values specifically? I mean, if you think of the liberal democratic order it’s, you know, free trade, human rights, primacy of the legal system, et cetera. Has China actually gotten to the point where you could define what it wants to replace the liberal democratic order with? Thank you.

FASKIANOS: Sure. So I think we can see, for example, you know, differences in Chinese definitions of human rights, where, you know, the West places values on individual civil liberty—you know, liberties. That’s not what, you know, China values. China places its values on sort of economics and what it calls economic and social rights. And so, you know, it’s arguing constantly and forever in the United Nations against the U.S. and other countries, you know, criticizing its rights on what’s going on in Xinjiang, et cetera. So notions of sovereignty are quite different in China from the liberal international order as well.

I think internet governance is another area where we’re likely to see a lot of battles for the control over data and privacy issues, quite different. Free flow of information. You know, China clearly doesn’t have the same value as the United States and other democracies when it comes to that. You know, free trade. I think even here one could argue that the ways in which China distorts its markets and efforts—you know, market barriers to entry, or look at something like Made in China 2025. It’s really an extraordinary distortion of the market, and of free trade, and indictment. It’s basically saying, you know, in ten areas of critical, cutting-edge technology Chinese companies have to control the Chinese market, right? So finding ways to prevent multinationals from competing on an even playing field.

So you know, has China articulated a different model, you know, beyond the priority of infrastructure development and sovereignty and, you know, the right to determine your own path? Not really. But I think if we look at how China behaves and the institutions of global governance, like the United Nations, what is it pushing for, if we look at the way that it, you know, flouts the decision of the permanent court of arbitration over the South China Sea, I think we can get a sense of how it interprets things like freedom of navigation, free trade, and human rights that are quite different.

Q: Thank you.

FASKIANOS: Thank you. Next question.

OPERATOR: Thank you. Our next question comes from the Middlebury Institute of International Studies of Monterey.

Q: Hello. This is Jacob Lonacker from the Middlebury Institute. Thank you, again, for your time today.

My question builds off some of the early ones asked from Georgetown. You mentioned how United States is actually a larger investor in Africa than China. Japan is a larger investor in Southeast Asia. But that it’s less visible, rather. And so my question is, do you feel the issues of transparency and debt diplomacy that OBOR is kind of associated with are getting—actually getting better? And if not, is there a U.S.-led or Western-led model that would benefit from more publicity in creating more sustainable investment practice?

ECONOMY: Yes. OK, so whether or not the projects are getting better, there have been a few instances where, again countries and, in some cases China, have stepped back and said, OK, let’s reassess these projects. You know, again, if I’m 100 percent honest—(laughs)—these are issues—these issues of good environmental practices, labor practices, transparency, you know, corruption issues date back to China’s go west strategy from the late 1990s, around China’s resource quest. There’s almost nothing new or different between the Belt and Road than there—than what’s been—was decades earlier, except the issue of connectivity. But the same concerns that have been raised, you know, for decades, are being raised now.

China has put in place many mechanisms, and efforts, and rules, and regulations, and laws that are designed to address all these issues that are being brought up in the Belt and Road countries, you know, concerned. All of these things exist. But they are just not implemented or followed. So the question really is, is China prepared to implement many of the laws and regulations that it already has on the books? And you know, my view, working on China, as someone who studies comparative politics is, look on the ground to see what’s happening. And so I wait to see—do I see real change? And it’s only been a few months since China sort of declaratively said that it is going to change the way it does business, or it’s going to try to do things better. So let’s wait and see. I’m not enormously optimistic, but we’ll see.

In terms of the U.S. response, you know, again, the U.S.—our private companies do their business, right? And Japanese private companies do their business. Japan is a little bit more strategic. They have their own set of corridors, for example, development corridors that they’ve outlined, you know, that they’d like to see developed, for example, through Southeast Asia. I think they are—they think more strategically. But there are partnerships ongoing now. So, for example, Japan, United States, New Zealand, and Australia worked together to—are working together to bring electricity to Papua New Guinea, for example. So there are these kinds of projects that are starting to come to the fore. The United States passed the BUILD Act to establish an entire new—entirely new institution called the International Development Finance Corporation, with $80 billion, that is designed to leverage private company initiative and infrastructure. Not just U.S. companies, but, you know, other countries can also tap into this financing, and hopefully have joint projects.

So there are initiatives underway. You know, would it benefit from more publicity? Absolutely. I would say that at the level of the U.S. bureaucracy, the National Security Council, State Department, and Defense Department, there is much more multilateral coordination, internationalist approach to our foreign policy than would be evident if you just listened to, you know, President Trump’s statements. There’s a lot going on. And so it lacks—you know, the free and open Indo-Pacific is the concept. It lacks, I would say, strong leadership from the very top. But there are many initiatives underway that are designed not only to criticize what’s going on with the Belt and Road, but actually to try to develop a positive response.

FASKIANOS: I think we have time to squeeze in one last question.

OPERATOR: Thank you. Our last question comes from Air Force Special Operations School.

Q: Hello. My name’s Susan Alaniz. So thank you Dr. Economy for this opportunity.

My question is regarding your comment about how China plans to set up bases that will be different from U.S. overseas bases. I was wondering if you could characterize the key aspects that China envisions would be different?

ECONOMY: Oh, no, no, sorry. I don’t envision them being different. It was—it was kind of a humorous statement about Chinese scholars saying that they would be different because they would be just defensive in nature, as opposed to U.S. hegemonic approaches. So I don’t see them necessarily as being different. I think, you know, at this point in time China doesn’t tend to engage very much, you know, militarily in trying to resolve conflicts in the Middle East, or wherever. They are—don’t have a forward-facing military in that sense. But I don’t think that it necessarily has to stay that way. So I was actually just trying to be humorous when I said that because I was quoting Chinese scholars, not my own belief about Chinese bases being fundamentally different from those of the United States. I think Chinese PLA officials have every ambition to match the U.S. in every capacity.

Q: How would you characterize them as security BRI?

ECONOMY: So I think—what the Belt and Road Initiative has allowed them to do is to say we are—we need to have bases because we have economic assets, we have our Chinese people overseas. We need to have the capacity to protect them, to defend them. And that’s perfectly reasonable and logical. They don’t want to rely on the United States. But do I think that that’s where things will stay? No, I don’t. And so I—at this point, that’s the rationale. That’s their argument. But I don’t think that that’s going to be the sum total of Beijing’s ambitions moving forward.

FASKIANOS: Thank you very much, Elizabeth Economy, for today’s conversation. It was really terrific. And I apologize to all of you. We have many more questions in queue and I’m sorry we could not get to them all. But we try to end on time. Liz is a leading voice on China so I encourage you, again, to take a look at her recent book. It’s in paperback now, The Third Revolution, as well as you can follow her on Twitter at @LizEconomy. And of course, check out the blog Asia Unbound, on our website, at CFR.org.

ECONOMY: Thanks very much, everyone.

FASKIANOS: Our next call will be on Wednesday October 30, at 12:00 p.m. Eastern time. Robert Blackwill, CFR’s Henry Kissinger senior fellow for U.S. foreign policy, will lead the conversation on “U.S. Foreign Policy in the Trump Administration.”

So, again, thank you all for being with us. I encourage you to follow @CFR_Academic on Twitter, and visit CFR.org for information on new CFR resources and upcoming events, as well as to take a look at our election 2020 web portal on the website, where we’re tracking all of the candidates’ statements on foreign policy. So we look forward to you tuning in again October 30.

(END)