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Public Forum: CHINA’ S WAY: BRI, AIIB, NDB, SCS, LMC, ETC - (Youtube and Summary Report)

 Youtube:

 

 

 

 

CHINA’ S WAY:

BRI, AIIB, NDB, SCS, LMC, ETC

 

Friday, 23rd February 2018.

 

 

Introductory Remarks:

Assoc. Prof. Dr. Ake Tangsupvattana

Dean, Faculty of Political Science

Chulalongkorn University

 

 

Speakers:

 

Mr. James Stent

Independent Director

XacBank, Mongolia

 

Mr. Kavi Chongkittavorn

Senior Fellow

ISIS Thailand

 

Prof. Dr. Chulacheeb Chinwanno

Thammasat University,

Thailand

 

Dr. Tang Qifang

Research Fellow

China Institute of International Studies

 

 

Moderator:

Assoc. Prof. Dr. Thitinan Pongsudhirak

Director of ISIS Thailand

Faculty of Political Science

Chulalongkorn


 

 

   Assoc. Prof. Dr. Ake Tangsupvattana

Dean, Faculty of Political Science

Chulalongkorn University

 

It is a cliché these days to talk about global power shifts but that is exactly what is happening in international affairs today. Amidst this ongoing global power shift, China now looms large on the global stage. Its Belt and Road Initiative, Asian Infrastructure Investment Bank and New Development Bank have the potential to redraw the global economic landscape. China's role in Southeast Asia from the South China Sea to the Mekong Region – the latter within the framework of China-supported Lancang Mekong Cooperation – also may reshape regional dynamics, while China's bilateral relationships with most Southeast Asian countries have been strengthened. At the same time, ASEAN's role, unity and centrality have become more problematic.

 

As the smaller regional states grapple with ongoing changes on the ground and in the sea, other major powers beside China are on the move in their own different ways. Southeast Asia is a region clearly in flux, a consequential nexus and arena for contest and cooperation. What happens in Southeast Asia will be portentous for what will happen on the broader global canvass.

 

 

Mr. James Stent

Independent Director

XacBank, Mongolia

 

In the past decade, Chinese banking has undergone an extraordinary transition. At the same time, there has been a steadily increasing drum beat of negative viewpoints of the Chinese banks and Chinese economic growth from Western sources. These are two different worlds being described. The perception generally from the West is that Chinese banks are fragile, prone to collapse and could bring the whole economy down with them.  The reality on the ground in China is very different.

 

Chinese banking is deeply embedded in the Chinese political economy, which makes it hard to describe the transition in a way which is understood by Western audiences. Similarly, Chinese banking and the political economy cannot be explained without context of Chinese culture. To understand Chinese banking and how it contradicts the Western narrative requires a study of how China works today and where it comes from amid 5000 years of Chinese culture.

 

There are four themes which can help explain how China’s banking works (as well as most other part of China) and the geo-strategic issues that inform the topic of this forum, as follows;

1.      Wealth and power

2.      Strategic focus

3.      Pragmatism

4.      Power of the party state

 

1.      Wealth and power

Almost everything China does today is with the objective of what they call “Rejuvenating China” or supporting China’s re-emergence to a great power. The objective of wealth and power is for the nation and people; these two are inseparable in the Chinese thinking. The Chinese thinking is that people must be wealthy for the nation to be strong, and if the nation is strong the people will be wealthy – everything proceeds from that ultimate goal. In fact, in the last 150 years of China history, China has been trying to find a recipe for recovering wealth and power. The reforms of Deng Xiaoping put them on the right road.

 

2.      Strategic focus

Chinese tend to be good at strategy. They have vision and an overall objective of what China will be like in the future – this has been reflected in Hu Jintao’s ‘harmonious society’ and more recently packaged as Xi Jinping’s ‘Chinese Dream.’ Consensus is emerging in China on the strategies and policies that need to be in place to realize the Chinese Dream to become wealthy and powerful. 

 

Once they set the strategy, it is implemented steadily and often slowly. For example, in the 1993 Plenum, the Communist Party laid out the objective to reform the banking system. They did not start working on it until 1998, it did not get it fully underway until 2000, and finally accomplished reform of the banking system by 2010. Once the objective is out there, chances of achieving it is pretty good, but likely slower than we would hope for. This very often results in criticism from the press for slow progress, but really they are experimenting and undertaking pilot projects pilot while feeling their way forward.

 

Xi Jinping spoke at the 19th Party Congress in October 2017 for 3.5 hours. The English translation ran for 64 pages. It basically said, ‘for the last 30 years, we have been trying to build a moderate prosperous society. Now, we pretty much achieved that. For the next 30 years, we will move towards next stage of growth.’ Then, for the next two hours he laid out the path to achieve that growth, which includes a change from Deng Xioaping’s foreign policy of avoiding friction overseas and focusing domestically, to a new, confident stage where is can assert itself and its interests on the international stage. They are moving toward a new phase in Chinese international relations.

 

The domestic strategy that he laid out is based upon combining a market economic with a socialist economy, which they call Market Socialism (in contrast to Market Capitalism). They understand the power of competition but at the same time they feel that state can play a very valuable role in guiding and intervening in the economy to affect economic outcomes. They don’t believe that the market, as in America, solves all problems.

 

Internationally, China’s development strategy can be divided into three portions. First, they are building up their military strength. This was a major preoccupation of Xi Jinping in his first five year term, with a goal that by the mid-21st Century (2050), the Chinese armed forces would be fully transformed to world-class level, meaning it would become a world power. Second, China is trying to push back the U.S. from its peripheries, an objective it shares with Russia. From the point of view of a Chinese strategist, the regional and global environment looks threatening. All around Chinese territory and in the Pacific and Indian Oceans, there is a string of US bases and allies, which does not appear friendly. The objective for China, then, is to secure its periphery and begin to push outwards in the next decades. The key part of their international is economic, financial and commercial; the Chinese have decided that the creation of a comprehensive network of trade, economic and financial relationships all over the Eurasian mass will be the best way of securing dominance in Asia, asserting their role and pushing the US back.

 

3.      Pragmatism

It doesn’t matter what kind of cat it is, as long as it catches the mice. Pragmatism, not ideology, is a key principle. The Chinese are very averse to taking risks, which is epitomized by the banking system. They are very conservative. For example here in Thailand, the Bank of China and the Industrial Bank of China have been here for many years, but have kept very low profiles. They only support Chinese companies that come here rather than pushing out into the market. Most importantly, they constantly adapt to changes of circumstances.

 

4.      Power of the party state

It is a Market Socialist economy where the government intervenes whenever it feels it can affect the outcome for the better. It has advantage of great continuity. How many countries can actually make 30 year plans and stick to them? In China, the leader 20 years from now would have been one of the people involved in the planning process. This gives great strategic and policy continuity over long periods of time.  

 

How do these themes relate to Thailand, ASEAN to China?

Most important one is the Belt and Road Initiative (BRI). This is the lynchpin of China’s long-term strategy to reassert itself onto the international stage and to expand out into Eurasia, down into South and Southeast Asia, into Central Asia and west towards Europe and the Middle East. It must be understood as being composed of many parts. The timing of the BRI, at least partially, came after the Obama Administration announced the Pivot or Rebalance to Asia. There are two aspects to the BRI, first the maritime road through Southeast Asia and the land-based belt to Central Asia. The maritime road directly reacts to the American shift to Asia, while the land road is China’s attempt to push west into Central Asia and developing close relationships with many countries in the region, including Russia (all the while staying out of the Middle East.)

  

The Asian Infrastructure Investment Bank (AIIB) which might (or might not) have come about had the status quo powers permitted China to have greater voting rights (commensurate with the size of its economy) within the World Bank and the IMF. Thus, China set up AIIB as their own development bank. The Chinese see the AIIB as an essential part of the BRI, but also important to China’s credibility and prestige, and its ability to assert itself internationally. There is also the New Development Bank, or the BRICS bank, which is headquartered in Shanghai. It aims to build a ‘sustainable future’ by lending for new technology and infrastructure, focused on Africa and South America.

 

Through the Mekong Lancang Cooperation Initiative, China seems to be becoming more receptive to downstream countries’ concerns about environmental and water security implications of its upstream activities. This is smaller scale compared with the AIIB, but very relevant to Thailand.

 

Military is limited to making sure that China is not vulnerable to being pushed around by anyone else in the region, and to assert itself in regions that it regards as core interests which they feel, based on history, are parts of China (Senkaku/Diaoyu Islands, South China Sea and the India-China border).

 

Thailand and ASEAN are in a zone contested between the US and China. There are those in the US and China who maintain that the rivalry is a zero-sum game, which is a gloomy prospect. However, it need not be. Smart diplomacy could avoid the ‘Thucydides Trap.’ Talk of containing China is futile; this is symbolized by the Obama Administration’s request to its allies not to join the AIIB – they all joined anyway. The US and China need to find the way to work together which lead to a win-win situation.

 

Thailand: how does Thailand fit in the environment?

Southeast Asia basically wants a stable environment in which it can develop, grow and prosper, and thus requires the US-China relationship to be win-win. Thailand has for the most part been very good at navigating troubled waters internationally, and it seems that it is able to continue that tradition. The question for Thailand is how it will maximize its own benefits vis-à-vis the US-China relationship.

 

 

Moderator: A lot of these Chinese vehicles (BRI, AIIB) were a reaction to the Obama Pivot/Rebalance.  In 1991, the Soviet Union collapsed after decades of the Cold War. There was a gut wrenching exercise in Sovietology – they didn’t see it coming. Let me draw this comparison – what are some of the fragilities or fracture points in China that we should be mindful of?

 

Jim Stent: The key to China’s success has been that it has studied very carefully what went wrong in Russia and Eastern Europe, and what went right in the West. It has learned lessons from that, and adapted it to the Chinese context. A key theme of Xi Jinping’s speech at the 19th Congress was that he said, ‘the world changes every minute, China changes every minute, and we the Party must change every minute.’ If China can continue to have the political will to adapt, then economic and strategic problems will be dealt with.

 

 

 

Mr. Kavi Chongkittavorn

Senior Fellow

ISIS Thailand

 

It is going to be China’s world whether we are ready or not. The point is that China and the Chinese character has to be understood; when China announces something, often we interpret it differently. Under Xi Jinping’s new approach, China is no longer keeping a low profile. China has already awoken, and will become more assertive. The ‘acronym soup’ of these new Chinese-led institutions represents the emerging Sino-centric order of the region.

 

1.      The Thailand and China relationship is very fragile. Thailand needs to do a lot more homework. The relationship is like a pyramid; at the top, there are very good high-level meetings, such as Princess Sirindhorn’s regular visits to China, and good relations at the bottom of the pyramid with strong people-to-people exchanges. But in the middle, Thailand and China have nothing. Thai-China relations have a lot of work to do. This is concerning as Thailand is very important to China’s southward strategy, through the BRI, AIIB or China’s approach towards ASEAN.

 

Thai-Chinese relations are very fragile. It is not true that Thailand tilts toward China, Thailand is not even pro-US. Thailand is pro-Thai, which is how it has remained so flexible for so long.

 

2.      Xi Jinping’s foreign policy is great. For example, when Le Keqiang visited Cambodia and discussed the future progress of the Lancang-Mekong Cooperation, which in its first 900 days has accomplished significantly more than the MRC (established for decades). Xi Jinping’s foreign policy means business.

 

China now will be more assertive and will be able and have the capacity to intervene constructively, with Chinese characteristics. For this, judging from Rohingya crisis in Myanmar, China has done so far a very good job in constructively interfering in trying to get the two parties together holding discussions with Dhaka and Naypidaw. This is something new, and shows that China now has the confidence to engage and lead on solving so-called hot-spots.

 

Another hot-spot is the South China Sea, which seems to be moving towards conclusion of the Code of Conduct next year during Thailand’s Chairmanship of ASEAN. Singapore is the current coordinator of ASEAN-China relations until July and Chair of ASEAN until the end of the year, but it will make sure that progress is firm and the groundwork is laid for completion of the COC next year. The outstanding issue for both sides is whether the COC will be binding or not.  

 

3.      One of the most important things that China has to deal with is that it is very good at long term planning. ASEAN also has its own plans for the future, but it cannot keep up with the pace of China. This explains why ASEAN has failed to respond to hundreds of Chinese proposals, including over 100 projects this year alone. China and ASEAN are celebrating 25 years of good relations, but from now on their relations will be based much more on day-to-day or programme-to-programme evaluation. Now the relationship will be much more difficult and likely be outcomes-based.

 

China has proposed to set up a high-committee to synergise the set up between the BRI and the ASEAN Master Plan on Connectivity. So far, ASEAN has not yet responded. The reason is that ASEAN as a whole has not yet reached the trust level to endorse the BRI. Thailand, Malaysia, Cambodia, Myanmar and Indonesia support the BRI individually, but when you don’t have ASEAN as a group to endorse the BRI, it will cause a high level of suspicion. All of these new high-profile, assertive plans from Xi Jinping haven’t reached their full potential yet because there is still a level of trust deficit.

 

China now has changed its approach towards Southeast Asia, one of the most diverse regions in the world. To engage with ASEAN requires creating a high level of trust. China’s strategy is very simple; it is flexible and pragmatic. China treats ASEAN as a strategic partnership.

 

China would like to weaken the alliance systems in the region. This is why China has proposed treaties and agreements of good neighborliness (which so far have not been widely accepted, except by Cambodia). China is signaling that it is willing to cooperate, but unwilling to form alliances. China has given to strong military aid to Myanmar, Cambodia and Thailand and is increasing joint military exercises with Indonesia, Malaysia and Thailand. China is now willing to take a high profile role and to participate in whatever capacity that will increase peace and stability in the region. But China’s role is still a working in progress and constantly evolving – that is why Thailand and ASEAN need to understand China’s way of thinking.

 

 

Dr. Tang Qifang

Research Fellow

China Institute of International Studies

 

There has been discussion that the flurry of new institutions and economic engagement is a part of a new China-led strategic architecture for the region. As an insider in China, however, I am not sure if it is so strategic and what, in the future, it will become. There does not seem to be a clear strategy behind these new pillars. They are, however, practical means to fill institutional voids to be used not only by China, but by all partner countries worldwide. Projects initiated under the Belt and Road Initiative (no longer called One Belt One Road in China) are practical and functional initiatives which will not only help China, but also help partner countries and communities.


 

 

Prof. Dr. Chulacheeb Chinwanno

Thammasat University,

Thailand

 

Are there similarities and differences between ‘China’s Way’ and the ASEAN Way?  When we look at the ASEAN Way, we know that we are talking about the ideas, norms and principles of interactions among ASEAN members; consultation for consensus, non-interference in domestic affairs, informality, inclusiveness, non-use of force and peaceful settlement of disputes. These are ideas and principles of dealing with each other in Southeast Asia. But when you look at China’s Way, these are not the same ideas and principles. When you look at the BRI, it looks more like a transportation and connectivity platform. AIIB is a financial structure. The BRICS Development Bank and the LMC are institutions. None of these are ideas or principles, but they are concrete structures which will lay the long-term foundations for China’s strategic architecture in the region.

 

The focus on China’s strategic structure or strategic architecture has come up in the last five years under Xi Jinping. The term ‘Red Dragon’ is used to describe Xi Jinping; he is ‘red’ because he comes from a revolutionary family, and he has now become the ‘dragon’ of China. 2 weeks after he was appointed Party Secretary in November of 2012, he went to visit a museum to visit an exhibition where he gave a speech first outlining his vision to rejuvenate the Chinese nation. After that, all the building blocks have followed. In 2013, he went to Kazakhstan and announced a Silk Road economic belt linking China to Central Asia and Europe. Later that year, he went to Parliament in Jakarta and announced the Maritime Silk Road of the 21st Century. In the meantime, he also mentioned another key concept – ‘Community of Common and Shared Destiny,’ which is a vision of how Xi Jinping would like the world to look.

 

To rejuvenate China, Xi Jinping has two key years in mind, 2021 which is the 100-year anniversary of the founding of the Chinese Community Party, and 2049, the 100-year anniversary of the founding of the People’s Republic of China (Double-100). In his latest speech at the 19th Party Congress, Xi Jinping divided the future into two periods – 2020-2035 when he envisages China to be a ‘moderately prosperous country, and 2036-2050 when China will become a ‘strong, civilized, harmonious and fully developed country.’ China has a grand strategy for itself, but also a grand strategy for a new world order.

 

What is the implication of this security architecture initiated by Xi Jinping in the past five years and looking forward in the future? Are these strategic architectures competing with or complementing the existing international system or world order initiated by the West and the United States since the end of the Second World War. The victorious Western countries set up a new world order – the arrangement of relationships among state actors so as to bring about peaceful relationships, peaceful coexistence and economic prosperity. For the world order to be sustainable requires two things; it needs agreed upon norms and functional mechanisms. Norms are principles, ideas, rules, regulations agreed upon by the member states. Mechanisms are institutions, meetings or organizations to monitor that all members commit and comply with the norms. The world order after WWII was sustained by political and economic orders established by the US and its allies. For the world political order, the norm is peaceful settlement of conflict – this is enshrined in Article 1 of the United Nations Charter – which is overseen by the UNSC. For the economic world order, there are two sub-dimensions; free trade and monetary dimensions. Free trade was upheld by GATT (the original plan for the ITO was discarded) which later became the WTO in 1995. For the monetary dimensions, the US dollar upheld the system while World Bank, IMF and ADB were established. The benefits of membership in this system were not distributed equally; while China was a member, and benefitted from its membership, it was never given an equal seat at the table as the United States or other powers. That is why China seeks change. In the past three decades, China has realized that it is economically and developmentally successful – it has benefitted from the US-led world order to become the second largest economy in just one generation. But it is also quite unhappy with several aspects of it. They are questioning the relevance of the Cold War mentality of the old ‘hub and spokes’ alliance system. They criticize the old economic structures which still favour the US and Europe, despite being out of date.

 

China has been able to weather successive economic crises; the Asian Financial Crisis in 1997, the Sub-Prime Mortgage Crisis and subsequent global recession in 2008, and the Public Debt Crisis in Europe. At the same time, China has witnessed the economic weakness and economic decline of the West. Consequently, China came to the realization that opportunity has arisen for China to take the stage and start reshaping parts of the post-WWII world order. There are external and internal factors which explain why China has taken this path. The external factor is the powershift in the 21st Century – there is a transition of power from the West to Asia, and second the diffusion of power which is no longer concentrated in the state, we now also need to pay attention to non-state actors too. Internally, China also sees that their economic development has been successful and difference from what the West has been proselytizing. China has proved that successful economic growth can come from state-led economic capitalism and liberal democracy is not a prerequisite for success, nor is the prioritization of economic rights over political rights. China has found its own alternative model for development which does not follow the prescriptions of the West.

 

We are seeing two competing economic models as well as two competing world orders. The Western, US-centric world order and the China-centric world order. BRICS could represent the political aspects of the Chinese-led world order, while the Permanent Five members of the UNSC represents the US-led world order. Economically, the AIIB and NDB complement and compete with the existing order. In socio-cultural dimensions, China has set up a network of Confucius Institutions and Chinese Cultural Centers around the world. The US-led and Chinese-led world orders are competing and cooperating at the same time, like a ying-yang. Will these two visions for a world order merge to a single vision, or will they keep in balance forever? I tend to think that they will remain like the ying-yang for several decades from now.

 

In that case, what can small states like Thailand or ASEAN do in this never-ending competition between the two models. China respects three types of power; the first is military and force, second is economic and the third is intellectual power or wisdom. Small states like Thailand or ASEAN cannot match military or economic power, but can match its intellectual power. We will need to accumulate knowledge and leverage our intellectual power like Lee Kwan Yew and Thanat Khoman did in the past in order to ride the ying-yang of the competing visions for Chinese and US world orders.

 

 


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