Beijing’s Asia Pivot in 2016

http://www.cfr.org/china/beijings-asia-pivot-2016/p37409

Authors: Joshua Kurlantzick, Senior Fellow for Southeast Asia, Council on Foreign Relations Sheila A. Smith, Senior Fellow for Japan Studies, Council on Foreign Relations Alexander Gabuev, Senior Associate and Chair, Russia in the Asia-Pacific Program, Carnegie Moscow Center Brahma Chellaney, Professor of strategic studies, Centre for Policy Research James Reilly, Senior Lecturer in Northeast Asian Politics, Department of Government and International Relations, University of Sydney Scott A. Snyder, Senior Fellow for Korea Studies and Director of the Program on U.S.-Korea Policy, Council on Foreign Relations Merriden Varrall, Director, East Asia Program, Lowy Institute
Interviewer(s): Eleanor Albert, Online Writer/Editor January 5, 2016
In its own “pivot” of sorts, China looks set to pursue broader ties in the Asia-Pacific region in 2016, advancing initiatives such as the Asian Infrastructure Investment Bank and ramping up maritime and land trade corridors. Seven experts assess the challenges and opportunities in China’s relations with Southeast Asia, Japan, Central Asia, South Asia, the Korean Peninsula, and Australia in the next year.

China’s relations with Southeast Asian nations, which had warmed significantly in the mid-2000s, have since settled somewhere between cool and downright icy. While 2015 saw a thawing of relations, coastal Southeast Asian nations, like Vietnam and the Philippines, continued upgrading their navies and coast guards, building relations with the United States to hedge against Chinese power, and searching for novel strategies to constrain China’s ambitions. At the same time, some mainland Southeast Asian nations, such as Laos and Thailand, not directly affected by regional maritime disputes, seemed increasingly comfortable with China’s ascendance into a major Southeast Asian power.

In 2016, China will almost surely continue its assertive diplomacy and military actions in Southeast Asia, and despite the slight cooling of tensions, these policies could easily give way to a China-Vietnam or China-Philippines standoff in the South China Sea. Chinese leaders have publicly argued that state petroleum companies have the right to continue exploring in the South China Sea—an assertion that, eventually, Beijing will likely back up by moving rigs into the disputed waters, as it did in 2014. In the past year, China has threatened Vietnamese, Australian, and U.S. vessels that traveled near territory where China has reportedly built up and militarized small atolls. This approach will likely continue, especially in Beijing’s dealings with Hanoi, which China perceives as the most significant Southeast Asian threat to China’s South China Sea claims.



“In 2016, China will almost surely continue its assertive diplomacy and military actions in Southeast Asia.”


Chinese leaders will also try to solidify Beijing’s soft and hard power in mainland Southeast Asia in the coming year. They will likely invite Aung San Suu Kyi and other top leaders of Myanmar’s National League for Democracy to visit China and will attempt to publicly demonstrate that Beijing can work well with an elected government in Naypyidaw, Myanmar’s capital. Beijing will likely seek to expand its military-to-military relations with Bangkok, while also using visits by Chinese officials to Thailand to emphasize how much better it understands the Southeast Asian country’s “unique” political situation than rich democracies do. Beijing may begin making use of the new Asian Infrastructure Investment Bank, the idea of which is popular in many poorer, mainland Southeast Asian nations, to bolster its aid in the region.


The response of Southeast Asian nations to China will probably remain divided. These divisions make it unlikely that the Association of Southeast Asian Nations (ASEAN), the most important regional grouping, will be able to reach consensus on any serious strategy for addressing disputed South China Sea claims, or dealing with any other challenges from China. In 2016, Laos will chair ASEAN, a country with few diplomatic resources and far less ability to lead the bloc than Malaysia, which chaired the organization in 2015. ASEAN’s secretary-general, meanwhile, former Vietnamese career diplomat Le Luong Minh, also shies away from vocal public regional leadership, especially in comparison to his predecessor. In the long run, only China benefits from a divided ASEAN, since none of the countries of Southeast Asia, including even giant Indonesia, are capable of standing up to China’s diplomacy and military actions on their own.
Sheila A. Smith, Senior Fellow for Japan Studies, Council on Foreign Relations


While some progress was made last year in improving ties between Tokyo and Beijing, Shinzo Abe and Xi Jinping face considerable hurdles in 2016 as they seek to stabilize their bilateral diplomacy. Three issues will make it more difficult to steady the relationship and could even prompt serious setbacks.


“The days of seeking a close Japan-China partnership are gone.”


First, as Abe implements defense reforms at home, South China Sea tensions have had an even more sobering effect on Tokyo’s assessment of its regional security. Arecent briefing (PDF) released by the ministry of defense puts it quite starkly: China’s increased military range from newly created bases on the disputed Spratly Islands could undermine the security of Asia’s sea lanes and threaten Japan’s strategic interests. Another concern for Japanese defense planners has been the increased Chinese military activities in the East China Sea in recent months. As eyes have focused on the South China Sea, Beijing has upped the pressure on its neighbors again across the East China Sea, including surveillance activities in waters near the entrance to Tokyo Bay. Further Chinese actions will increase the pace of Japanese surveillance and maritime readiness in and near its own waters.


Second, economic ties have always been seen as the real glue in this bilateral relationship, but the rebound has remained weak. Multiple high-level missions of Japanese corporate leaders visited China in 2015, anxious to renew investment and open new opportunities with Chinese partners. While it is too early to tell if this renewed focus on deepening economic interdependence will help political ties, trade and financial flows, while considerable in size, are no longer growing at the pace they once did.


Finally, there is little evidence to suggest that the two Asian giants will be able to implement a strategy of sustained cooperation. Abe and Xi have now met twice. The limited homework they assigned their governments at the first meeting, a risk reduction agreement for their two militaries in the East China Sea, has yet to materialize. On the positive side, Tokyo and Beijing met in Seoul in November to restart trilateral consultations. However, it is unclear when tangible gains from this fragile trilateral might be made.


In 2016, however, it is unlikely that Japan will abandon its efforts to diversify regional partnerships, as it has done with India and Vietnam, and to support collective regional multilateralism, such as the Trans-Pacific Partnership, that balance what Japan sees as Chinese efforts to undermine established patterns of regional collaboration. The days of seeking a close Japan-China partnership are gone, and Tokyo prefers a geostrategic strategy of coalitions that support its interests, especially those increasingly challenged by Beijing.
Alexander Gabuev, Senior Associate and Chair, Russia in the Asia-Pacific Program, Carnegie Moscow Center


Central Asia is becoming an increasingly important region for China. Beijing’s clout in Central Asia is growing and it will continue to do so in 2016. In 2015 China overtook Russia as the region’s major trading partner and investor. Chinese interests in Central Asia are concentrated in three areas: stability in the vast landmass bordering the Xinjiang Autonomous Region; access to natural resources; and the One Belt, One Road (OBOR) project, the focal point of Xi’s diplomatic endeavors to integrate Asia.


China will have to deal with three interrelated challenges in Central Asia in the coming year. The first is the fallout from a sharp decline in commodity prices, which have hit Central Asian countries hard. Kazakhstan, Turkmenistan, and Uzbekistan are largely dependent on hydrocarbons, while Kyrgyzstan is affected by sliding copper and gold prices. These developments may affect social stability, raising risks for Chinese investors. Migrant laborers returning from Russia, a country experiencing its own economic troubles, add to the pressure on local societies already faced with local youth unemployment.


“Beijing’s clout in Central Asia is growing and it will continue to do so in 2016.”


The second challenge is the deteriorating security situation. Some alarming signs, including the defection of the head of Tajikistan’s elite police and his subordinatesto the self-proclaimed Islamic State, demonstrate that the influence of radical groups is growing. Given China’s harsh handling of Uighur separatism, local radicals may target oil and gas pipelines to China or directly attack Chinese citizens and property. Beijing currently relies on local armed forces or Russian military personnel (as it has in Tajikistan and Kyrgyzstan) to protect its interests. Some Chinese experts have suggested deploying private Chinese military companies, but this is an unlikely move in the short-term as local societies are nervous about a potential Chinese military presence. Instead, one may expect increased military assistance from Beijing.


The third challenge is China’s complicated relationship with Russia. Moscow views Central Asia—former territory of the Russian empire and the USSR—as its own backyard and is concerned that Beijing’s clout may displace Moscow’s influence. In May 2015, Chinese President Xi Jinping and Russian President Vladimir Putin signed a declaration to coordinate the China-led OBOR initiative and the Russia-led Eurasian Economic Union (EEU). However, China and EEU members are still discussing how to cooperate. China prefers a bilateral approach which gives it more bargaining power vis-à-vis weaker partners as opposed to multilateral frameworks with collective rules. Still, Russia is a key security guarantor in the region, and Beijing wants to maintain stable ties with Moscow so that it continues to provide security in the region for Chinese investments.


Attempts to formulate a coherent response to theses challenges are likely to preoccupy Beijing in 2016. China is likely to pursue bilateral deals with Central Asian states on infrastructure investments and the reallocation of manufacturing assets to the region. Beijing will also try to boost dialogue with Moscow to develop a division of labor and to accommodate mutual interests.
Brahma Chellaney, Professor of strategic studies, Centre for Policy Research


China has embarked on major initiatives to change the region’s geopolitical map with its own Asian pivot. The Silk Road initiative and the Asian Infrastructure Investment Bank epitomize Beijing’s efforts to reshape Asia’s security and financial architecture. In 2016, China appears determined to step up its efforts to fashion a Sino-centric Asia in place of the present regional order centered on a stable balance of power.


“China has embarked on major initiatives to change the region’s geopolitical map with its own Asian pivot.”


Chinese President Xi Jinping has articulated a more expansive role for China than any leader since Mao Zedong. His One Belt, One Road project, an expansive initiative to build up land and maritime trade routes, is intended to extend the country’s commercial and strategic interests. The Maritime Silk Road and the overland Silk Road encompass Southern Asia and are linked by the $46-billion China-Pakistan Economic Corridor. Pakistan has given China exclusive rights to run the Chinese-built port at Gwadar for forty years, which, given its location at the mouth of the Strait of Hormuz, is expected to become a critical outpost for the Chinese navy. Beijing, in turn, has finalized the sale of eight submarines to Islamabad, a transfer that would more than double the size of Pakistan’s submarine force. China is clearly using Pakistan as a launch pad to play a bigger role in the Indian Ocean, the Middle East, and Central Asia.


China’s ambitions in the Indian Ocean are also reflected in its submarine forays in the region, which began in 2014, and the announcement that it would establish a naval hub in Djibouti, which overlooks the narrow Bab el-Mandeb Strait. Sina Military Network, a Beijing-based defense website with ties to the People’s Liberation Army, has claimed that ten Chinese attack submarines could blockade India’s eastern and western coastlines. The question of whether the Maritime Silk Road is just a benign-sounding new name for Beijing’s “string of pearls” strategy can no longer be dismissed.


Make no mistake: China’s strategic maneuvering in the Indian Ocean and Southern Asia draws strength from its muscular actions in the South China Sea, where it has incurred no international costs for creating artificial islands to host military facilities and expand its sea frontiers. Beijing’s territorial nibbling in the Himalayas and its damming of international rivers on the Tibetan plateau are also part of its effort to change the status quo.
James Reilly, Senior Lecturer in Northeast Asian Politics, Department of Government and International Relations, University of Sydney


Since 2009 Chinese leaders have consistently described their relationship with Pyongyang as “normal state-to-state relations.” It’s high time we took them at their word. This “new normal” in China’s approach to North Korea, which is likely to persist into 2016, rests on three pillars.


“China’s relationship with the United States is far too important and complex to allow North Korea the opportunity to divert or dominate its agenda.”


First, China opposes North Korea’s pursuit of nuclear weapons. Beijing has sustained its dual approach of diplomatic isolation and implementation of UN sanctions in hopes of discouraging Pyongyang from developing nuclear weapons while nudging Pyongyang back to the negotiating table. Chinese President Xi Jinping has yet to visit Pyongyang while Kim Jong-un continues to wait for his first invitation to Beijing. While China’s implementation of the UN sanctions regime leaves much to be desired, particularly on so-called “luxury items” like expensive cars and jewelry, China has apparently maintained its controls over potential dual-use items with possible military usage.


At the same time, China insists on its right to maintain normal economic interactions with North Korea, though Beijing has been trying to wean Pyongyang off pure aid in favor of more commercially viable ties. For instance, the price North Korea receives for its coal exports to China—Pyongyang’s largest export—has fallen following the decline in energy prices globally. Beijing also now demands that Pyongyang contribute to infrastructure projects. China’s new $150 million Yalu River bridge thus sits completed but unopened, waiting for North Korea to complete connecting roads on its side—or allow Chinese firms to do so.


Finally, Beijing refuses to allow Pyongyang a veto over its important diplomatic relations in the region, particularly the burgeoning economic and political relationship with Seoul. The considerable warming of Beijing-Seoul ties in 2015 was due more to shared antipathy to the Abe government in Japan rather than Beijing sending a signal to Pyongyang. Similarly, China’s relationship with the United States is far too important and complex to allow North Korea the opportunity to divert or dominate its agenda.


Efforts from Washington to push Beijing off this established course, either by proposing new multilateral negotiations without Pyongyang and/or tightening economic sanctions, are unlikely to receive favorable hearing in Beijing. Absent credible signals of Pyongyang’s willingness to negotiate away its nuclear weapons program, Beijing has limited incentives to propose new diplomatic initiatives towards Pyongyang. Therefore, any major changes in the China–North Korea relationship will have to originate from Pyongyang.
Scott A. Snyder, Senior Fellow for Korea Studies and Director of the Program on U.S.-Korea Policy, Council on Foreign Relations


The China–South Korea relationship enters 2016 with positive momentum. This year, Chinese President Xi Jinping met with his South Korean counterpart, Park Geun-hye, in Beijing for the sixth time since 2013, while Xi has yet to meet with North Korean leader Kim Jong-un. Additionally, Beijing and Seoul ratified a bilateral free trade agreement (FTA) in June that will come into force in 2016. Nevertheless, this apparent momentum may peak next year as the limits of the China-South Korea relationship become apparent.


“Seoul may face harder choices and greater pressures in future decisions where it must weigh conflicting preferences in Washington and Beijing.”


First, the FTA may increase trade and spur a short-term boost to both countries’ economies. But against the backdrop of a slowing Chinese economy, growing competition between South Korean products and less expensive Chinese rivals in the Chinese consumer market and Chinese competitive inroads against South Korean exports in third country markets will gradually create economic friction. Moreover, South Korea’s prospective membership in the U.S.-led Trans-Pacific Partnership has raised questions about whether benefits from the TPP might outweigh the benefits of the China–South Korea FTA.


Second, Beijing-Seoul top-level contacts have intensified as a means of China showing displeasure with the Kim Jong-un regime. Yet China’s strategic interests in stability and the denuclearization of the Korean Peninsula will require Beijing to improve ties with Pyongyang in order to restore its leverage. High-level, symbolic people-to-people exchanges are one way to boost Beijing-Pyongyang ties. For example, high-ranking Chinese Politburo member Liu Yunshan was the only foreign guest to attend the seventieth anniversary of the founding of the North Korean ruling party. South Korea has also sought China’s support for its Korean unification efforts, but Beijing’s leverage with Seoul continues to depend in part on the quality of Beijing’s relationship with Pyongyang.


Third, the strengthening of China–South Korea ties over the past year has generated speculation among some analysts that the improvement of relations comes at the expense of the U.S.–South Korea alliance. U.S. President Barack Obama dismissed such suspicions in October, stating that the United States supports a strong China–South Korea relationship, but it expects like-minded countries to speak out when China prioritizes unilateralism or exerts pressure to manage international issues. However, Beijing perceives Seoul as a weak link in the U.S.-centered system of alliances in Asia. Seoul may face harder choices and greater pressures in future decisions where it must weigh conflicting preferences in Washington and Beijing.
Merriden Varrall, Director, East Asia Program, Lowy Institute


In 2016, Australia-China relations will continue on a similar trajectory as in recent years. Australians see enormous economic opportunities in China, but are also worried about China’s potential as a military threat (PDF).


On the one hand, China will remain important to Australia’s economy in the coming year, particularly as a destination for resource and education exports, but also as a source of tourists, with 859,000 Chinese visitors traveling to Australia in 2014. Australia will continue to be critical to China as a source of natural resources. The signature of the Australia-China free trade agreement in 2015 was a major step forward in bilateral ties. While the economic benefits of the agreement have been debated, the deal reflects the growing strength of political ties. Good people-to-people connections reinforce the relationship.


“Australians see enormous economic opportunities in China but are also worried about China’s potential as a military threat.”


On the other hand, many Australians feel that China could become a military threat in the next twenty years. The security implications of a private Chinese company’s ninety-nine-year lease of a port in Darwin have been hotly debated. The Australian government has been vocal in its criticisms of China’s activities in the East and South China Seas. While Australia is unlikely to conduct freedom of navigation operations in the South China Sea, it will continue to support the U.S. stance on upholding international norms and laws. The 2016 Defence White Paper will provide a clearer expression of Australian security concerns about China.


China sees Australia as benign and unthreatening. However, it is irritated by what it sees as Australia’s reflexive tendency to side with the United States on strategic issues involving China. Nevertheless, China will continue to build and strengthen bilateral ties where possible.


Prime Minister Malcolm Turnbull, who came to power in 2015, is unlikely to make any radical departures from Australia’s existing China policy in 2016. However, personalities do matter. Turnbull has long experience doing business in China and his foreign policies are more pragmatic than his predecessor’s. He will likely be able to develop a stronger working relationship with the Chinese leadership. This does not mean that he will be “soft” on China. Turnbull has signalled that he will strike a balance between strengthening economic ties with China and working with allies to respond to Chinese actions that raise strategic concerns.