China’s “One Belt, One Road” to Where?

During visits to Central and Southeast Asia in 2013, Chinese President Xi Jinping unveiled Beijing’s aspiration to create what it called the Silk Road Economic Belt and the 21st-Century Maritime Silk Road.  Both would entail the construction of new infrastructure to better connect the present-day countries along what was once the ancient Silk Road between China and Europe.  The former would do so over land with roads, railways, and airports; the latter across the ocean with seaports.  China’s two-part aspiration is now commonly referred to as its “One Belt, One Road” initiative.

China One Belt, One Road Initiative

At the time of Xi’s unveiling, China was near the zenith of its economic power.  Not even the 2008 global financial crisis seemed able to derail China’s economic ascent.  Some saw the “One Belt, One Road” initiative as a way for China to extend not only its economic, but also its political reach across Eurasia.  India had begun to worry about what it considered to be China’s “string of pearls,” a series of Chinese-built seaports across the Indian Ocean.  Others viewed the initiative even more broadly as an ambitious effort to reorient global commerce towards China.

But since then the air of invincibility surrounding China’s economy has dissipated.  China’s engines of growth—export manufacturing and infrastructure construction—have sputtered, as the debt that fueled them and the overcapacity that they created have ballooned.  Over the last year and half, Chinese leaders have been forced to repeatedly “fine tune” their economy to keep it growing.  They boosted China’s government spending, devalued its currency, cut its interest rates six times, lowered its bank reserve ratio seven times, and even directly intervened in its stock market.  Still, China’s economy continues to slow.

That slowdown has spurred Chinese leaders to seriously begin to shift their export and infrastructure-led economy to one that is driven by consumers.  How successful that transition will be is uncertain.  But one thing is clear, the “social stability” so prized by the Chinese Communist Party has begun to fray.  Popular unrest is on the rise.  The number of labor protests in China has soared from about 100 in 2010 to almost 2,500 in 2015.[1]

Thus, Beijing has every incentive to keep its giant manufacturing and infrastructure-construction state-owned enterprises (SOE) humming, as its economy makes the transition.  Seen in that light, China’s “One Belt, One Road” initiative looks less like a well-planned strategy and more like a scramble to keep the order books of its SOEs full.  New infrastructure contracts abroad would help do that; and once built that new infrastructure might help Chinese manufacturers export at a lower cost.

One can see China’s push to build more infrastructure projects from Indonesia to Pakistan.  In September, a Chinese-led consortium won approval from Indonesia to build a $5.5-billion high-speed railway in Jakarta.  But the consortium won only after it agreed that the Indonesian government would not have to guarantee the Chinese loans needed to finance the railway’s construction.  While that concession may have secured the approval, it also increased the potential financial losses that the consortium would have to bear if anything goes wrong.  With such large and complex construction projects, it is hard to ensure that will not happen.

Surely, China expected a different outcome after its construction companies built a port at Gwadar for Pakistan in 2007.  Despite a total investment of over $1 billion, the port has remained virtually idle.  Now China is doubling down on the Gwadar project.  It has promised $45.7 billion in fresh financing to build the China-Pakistan Economic Corridor, a series of energy, road, railway, and pipeline projects that will more closely tie Gwadar to China.

Of course, China can still benefit from such infrastructure projects even if they turn out to be unprofitable.  The new road, rail, and pipeline routes through Pakistan will enable China to import strategic resources, like oil, natural gas, and minerals, from the Middle East without being reliant on sea routes through the Indian Ocean.  The projects could also deepen China’s “all-weather” friendship with Pakistan by creating new constituencies within Pakistan that benefit from the economic activity that the trade routes to China could foster.

Other land-based links to China could do the same. The Kunming-to-Bangkok railway is another example.  The portion of it in China is already finished; the portion in Laos broke ground in December; and the final portion in Thailand is slated to begin construction in May 2016.  Given the massive scale of Chinese trade, even if a small portion of it is redirected over the railway, it could reshape the economic interests of a small country like Laos.  Indeed, China may hope to use the railway to pry Laos away from its traditional ally, Vietnam, and gain another friend in ASEAN.  On the other hand, China would not benefit to the same degree from Chinese-built seaports and airports that are not directly connected to it.  While they may boost trade in the host country, the course of that trade could be redirected elsewhere, if trade with China does not evolve as expected.

That is now a real possibility.  If the Chinese economy continues to soften, it means that China will need to import fewer raw materials and export fewer finished goods.  In the second half of 2015 China’s monthly imports fell 10 to 20 percent from a year earlier; and its exports slipped too.  Unless global demand revives or Chinese consumers pick up the slack, Beijing might well expect its “One Belt, One Road” initiative to yield more long-lasting political than economic benefits.

[1] “Number of strikes and worker protests in China hits record high in November,” China Labour Bulletin, Dec. 3, 2015.

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The Almost-Normal Country: Japan and the Use of Force

The enactment of Japan’s new national security bills was a long time in the making.  The bills, already passed by the lower house of the Japanese Diet in July, were approved by its upper house last week.  But ever since Shinzō Abe became Japan’s prime minister in 2012, he had sought legislation that would enable Japan to engage in “collective self-defense,” the ability to aid friendly countries under attack.  While that may seem routine in most countries, it has been anything but in Japan.  Many were unhappy with the legislation’s passage.  Those who opposed it feared that it would lead the country into war; and even some of those who supported it grumbled that it did not go far enough to make Japan a truly “normal” country, one where the use of force is considered as a legitimate tool of international politics.

Japan Collective Self-Defense

Unsurprisingly, China was quick to condemn the legislation’s passage.  China’s Ministry of National Defense declared that Japan’s new security laws ran “counter to the trend of the times that upholds peace, development and cooperation.”  The ministry chastised “Japan’s war mentality, its reinforcement of military alliances and attempts to send more troops abroad.”  Chinese media was less charitable.  Xinhua carried the headlines: “China Voice: Is Japan bound up to battle chariot?” and “News Analysis: Japan’s pacifist ideals stripped as Abe steps closer to resurrecting old war machine.”  One commentator at The People’s Daily blamed the “unyielding spirit of militarism” of Japanese leaders who were “breaking [Japan’s] pacifist promise and getting ready to send its troops to battles again.”[1]

Of course, China rarely passes up an opportunity to remind Japan of its imperial aggression.  Thirty-six years of Japanese economic aid to China—now nearly $1.2 billion per year—has yet to restrain its reflex.  In part, that is because the Chinese Communist Party (CCP) has often used anti-Japanese sentiment to buttress its own political legitimacy.  (Only recently did the CCP even credit its longtime Chinese rival, the Kuomintang on Taiwan, for its contribution—arguably larger than the CCP’s—to resisting Japan in World War II.)

That it took so long for Japan to pass this sort of legislation is a testament to the strength of Japan’s postwar pacifist sentiment.  While militarist elements may still lurk in Japan, most Japanese are decidedly uncomfortable with the use of force in international politics.  That was clear during Japan’s negotiations with Russia over the Northern Territories (or southern Kuril Islands in Russia) in the 1990s.  Though Japan had already begun its long economic stagnation, its military and political might was still near its peak.  In contrast, Russia, following the fall of the Soviet Union, was at its nadir.  Things were so bad in the Russian Far East that it was questionable whether Moscow could provide enough food or heat for its population on Sakhalin Island, let alone defend it.

Yet, Japan did not try to use its military or political capital to pressure Russia into a settlement.  Rather, Japan solely relied on the persuasive power of its economic assistance.  That tactic ultimately came to nothing.  After Russia’s economy recovered, Japan’s window of opportunity to settle the dispute on favorable terms closed.  Today, Russian leaders act without concern over Japanese reaction.  They cavalierly flout Japanese interests.  This year, a series of senior Russian officials visited the four disputed islands, despite repeated protests from Tokyo.  Russian Prime Minister Dmitry even toured one of them in August.  While there, he underlined that the Kuril Islands “are part of Russia… That is how it is and how it will be.”[2]

Japan’s self-imposed limitation on its use of force has also impacted its ability to secure its place in a changing East Asian geopolitical environment.  China’s economic rise has drawn other Asian countries closer to its orbit, while its seemingly relentless military rise has upset the regional balance of power.  Without the ability to form true security partnerships, Japan has risked becoming isolated.  Hence, Abe has eagerly cultivated new political and economic ties across the Asia-Pacific, from Australia and India to the countries of Southeast Asia.  Japan has certainly become more sensitive to changes in Asia’s geopolitical balance.  Last year, after Thailand’s relations with the United States soured, offering China an opening, Tokyo leapt into the breach with pledges of economic engagement with Bangkok.

Surely, the most immediate beneficiary of Japan’s new security laws is the United States.  For the past half century, the United States has borne the entire security burden of the alliance between the two countries—if Japan is attacked, the United States is obligated to defend Japan; but if the United States is attacked, Japan has no such reciprocal obligation.  Even during the Cold War, that uneven arrangement rankled some Americans.  To make it more equitable, Japan accepted the lion’s share of the financial burden to host American forces in Japan.  But with the end of the Cold War and the withdrawal of a substantial portion of American forces from Japan (to Guam and elsewhere), the relationship was about to tilt again.  Thus, it was hardly surprising that Washington welcomed the legislation’s passage.

But beyond the United States, the legislation also enables Japan to more effectively cooperate with other countries on security matters.  If Japan’s relationships with Australia, India, the Philippines, and recently Vietnam mature into security partnerships, those countries can now count on Japan as a full partner.  In fact, in the days before the upper house vote on the national security bills, Abe met with Vietnam’s communist party secretary to discuss stronger security ties, in light of Vietnam’s dispute with China in the South China Sea.  Abe pledged more patrol boats for Vietnam.  Such promises is partly what worries Japanese opponents of the bills.  Getting Japan entangled in the disputes of other countries could pull it into a conflict, perhaps with China.  On the other hand, the possibility of facing a regional network of security partners might restrain China’s aggressiveness.  After all, China’s own economic prosperity (tenuous as it has become this year) requires peace and stability.

Even with the enactment of its new national security bills, Japan seems unlikely to seek the active use of military force far from home.  After all, Japan’s debt-laden government is in no position to rapidly expand its self-defense forces without hurting its still-weak economy.  Moreover, the conditions under which Japan can use force to support American expeditionary efforts abroad are still narrowly circumscribed.  The new legislation may be a step toward a Japan that is more comfortable with the idea of the use of force.  But the road to an actual use of force remains a long one.  Ironically, China may be the one country that could propel Japan faster down that road.

[1] “China Voice: Is Japan bound up to battle chariot?” Xinhua, Sep. 19, 2015; “News Analysis: Japan’s pacifist ideals stripped as Abe steps closer to resurrecting old war machine,” Xinhua, Sep. 19, 2015; “Japan’s new security bills against trend of the times: defense ministry,” Xinhua, Sep. 19, 2015; Wen Zongduo, “Abe’s win is Japan’s loss,” Chinadaily.com, Sep. 19, 2015.

[2] “Moscow officials ‘have always and will continue to’ visit Russian Kuril Islands – PM,” RT.com, Aug. 23, 2015.

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Strategic Intentions: China’s Military Strategy White Paper

On Tuesday, China published its latest defense white paper.  Unlike its’ eight predecessors, this document was the first time that China publicly unveiled parts of its military strategy.  Even the paper’s title was changed from China’s National Defense to China’s Military Strategy.  Rather than the opaque and retrospective generalities found in earlier versions, the new white paper offered details about China’s strategic intentions and the future development of its military.

One Chinese military official went so far as to state that the greater transparency of the new white paper was a sign of a more confident China.  That said, many of the revelations contained in the document were hardly novel.  It profiled China’s decades-old “active defense” strategy, which maintains that China would always remain strategically defensive–though perhaps not so at the operational or tactical levels.  It also detailed the Chinese military’s primary aim: to prepare itself to fight “local wars under conditions of informationization”—in other words, regional conflicts in which command, control, communications, intelligence, reconnaissance, and surveillance (C4ISR) would play major roles.  That too was already known.[1]

But other revelations in the white paper were more illuminating.  It showed that China intends to focus its force development in four domains: cyberspace (it will boost its cyber warfare capabilities); outer space (it will take steps to defend its interests there, even though it is opposed to the militarization of that domain); nuclear forces (it will build a reliable second-strike capability); and finally the oceans.

Yueyang - China frigate

That last domain is what currently worries China’s neighbors the most, given Chinese assertiveness in the East and South China Seas. Indeed, the white paper highlighted Beijing’s intentions to further expand the Chinese navy and extend the range of its operations—shifting from “offshore waters defense” to “open ocean protection.”  The white paper argued that China’s growing overseas interests have changed the country’s focus from being a continental land power to a maritime power.  That has led China to prioritize its navy in its military modernization plans.  In what once would have been heresy in the Chinese military, the white paper declared that “the traditional mentality that land outweighs sea must be abandoned.”[2]

That means that in the future China would not only defend its coastline from attack, but also its sea lanes of communications through international shipping routes, including those from the Middle East through which over half of China’s oil flows.  That, in turn, means countries like India will have to get used to seeing more of the Chinese navy in the Indian Ocean.  By the same token, Japan and the United States should expect more Chinese naval and air patrols in the Pacific Ocean and maybe one or two more Chinese aircraft carriers.

The white paper also listed China’s strategic concerns.  Chief among them was America’s “rebalance” toward Asia, under which the United States has increased its military presence and strengthened its alliances in the region.  The white paper also noted Japan’s push to revise its military and security policies, characterizing them as “sparing no effort to dodge the post-war mechanism.”  China’s “offshore neighbors” warranted mention too for their “provocative actions [to] reinforce their military presence on China’s reefs and islands that they have illegally occupied,” no doubt referring to the Philippines and Vietnam in the Spratly Islands.

While the white paper’s greater transparency may be the product of a more confident China, it is still a country that has not escaped the classic security dilemma.  As the white paper itself observes, China’s neighbors are rearming and helping the United States bolster its security alliances.  So, even as China strives to improve its security, it has prompted its neighbors to seek ways to improve their security situations, thereby reducing the effectiveness of its own efforts.  That is something that China’s military strategy probably did not intend.

[1] “China sticks to ‘active defense’ strategy,” interviewee Senior Captain Zhang Junshe, Vice President of the China Naval Research Institute, China 24, CCTV, Beijing, May 26, 2015,  http://english.cntv.cn/2015/05/27/VIDE1432675208303328.shtml; “White Paper highlights ‘active’ defense strategy,” interviewee Senior Colonel Zhou Bo, China Ministry of National Defense, host Han Bin, China 24, CCTV, Beijing, May 26, 2015, http://english.cntv.cn/2015/05/26/VIDE1432614727198411.shtml.

[2] China’s Military Strategy (Beijing: State Council Information Office of the People’s Republic of China, May 2015); “China’s defense white paper,” interviewee Senior Captain Zhang Junshe, Vice President of the China Naval Research Institute, host Wang Yizhi, Dialogue, CCTV, Beijing, May 26, 2015, http://english.cntv.cn/2015/05/27/VIDE1432668717544907.shtml.

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Japan’s Security Role in Southeast Asia (and the South China Sea)

Only a few years ago, it would have seemed inconceivable that Japan would have any security role outside of Japanese territorial waters.  But in a January 2015 interview, Admiral Robert Thomas, commander of the U.S. Seventh Fleet, related that Washington would welcome Japanese maritime air patrols in the South China Sea.  He said that they could help to stabilize the region by balancing China’s growing naval strength there.  That broke a long-standing taboo in Japan on public discussion of such uses for the Japanese armed forces.  While it still may be some time before Japan mounts maritime air patrols over the South China Sea, yesterday it held an historic naval exercise in those waters.

It was the first time Japan’s Maritime Self-Defense Force ever conducted a bilateral exercise with the Philippines.  Two Japanese destroyers and a Philippine corvette practiced how to deal with “unplanned encounters at sea.”  They exercised near Subic Bay, a big Philippine (and former U.S.) naval base that is only 260 km from Scarborough Shoal—the spot where Chinese and Philippine patrol boats were locked in a months-long standoff in 2012 and where the Chinese coast guard used a water cannon to drive away Filipino fishermen just last month.[1]

Even before the naval exercise, the Japanese and Philippine coast guards held a smaller drill in Manila Bay a week ago.  Later this year, Japan will deliver the first of ten offshore patrol boats that it promised the Philippines in 2013.  Manila plans to use them to better monitor its territorial waters in the South China Sea and prevent intrusions into them.  Security ties between the two countries have grown substantially.  Last year, Japanese Prime Minister Shinzō Abe invited Philippine President Benigno Aquino III to Tokyo to discuss greater security cooperation.  At the time, Aquino went so far as to say that “nations of goodwill can only benefit if the Japanese government is empowered to assist others… especially in the area of collective self-defense,” giving a nod to Abe’s efforts to loosen Japan’s constitutional constraints that prevent his country from defending allies under attack.[2]

South China Sea - Japan

Japan has also expanded its security activities with other Southeast Asian countries.  Early this year, it mended ties with Thailand, whose coup led to a surge of Chinese influence there and strained relations with its longtime ally, the United States.  In March, Japan signed an accord with Indonesia to enhance military exchanges and collaboration on defense equipment development.  And Japan has steadily expanded its military cooperation with Vietnam, another claimant in the South China Sea dispute.  Japan promised it offshore patrol boats too.  In fact, immediately after the Japanese coast guard finished its drill in the Philippines last week, one of its cutters proceeded to Vietnam to participate in an exercise there.[3]  Japan has clearly sought a greater role in the security of the region.

Nonetheless, there is a question of whether Japan’s military can sustain a wider role.  Contrary to China’s claims, Japan’s defense budget has not grown much.  It rose less than three percent in the last year (and not at all in U.S. dollar terms).  Any real expansion of Japanese military presence in Southeast Asia will have to run on a shoestring until Tokyo can afford a true increase in military spending.  That is not to say Japan is without options.  Its new long-range P-1 maritime patrol aircraft would be useful for patrols over the South China Sea.  Moreover, Japan could enlarge its navy by simply slowing the pace at which it decommissions older warships, many of which are still highly capable.  But there are limits too.  Keeping older warships in service entails higher maintenance costs which may crowd out investment in new weapon systems.

As Japan expands its security role in Southeast Asia, new questions will arise.  Foremost among them is whether Japan’s new role will lead to greater stability or instability?  On the one hand, the absence of an adequately balancing force in Southeast Asia has given China a free hand to assert itself in the South China Sea, as marked by its massive land reclamation activities in the Spratly Islands.  Given how grindingly slow America’s rebalance to Asia has been, Japan’s security support could be just what the region needs.

On the other hand, any minor incident between Chinese and Japanese forces in the South China Sea could easily escalate tensions between their two countries.  Anyone who remembers the accidental collision between an American EP-3 surveillance plane and a Chinese J-8 fighter in 2001 can imagine how a similar incident between Japanese reconnaissance aircraft and intercepting Chinese fighters could spiral into a major crisis.  Let us hope deterrence prevails.

[1] Mynardo Macaraig, “Philippines and Japan hold historic naval drills in flashpoint waters,” AFP News, May 12, 2015; Manuel Mogato, Adam Rose, and Ben Blanchard, “Philippines, Japan coast guards hold anti-piracy drills,” Reuters, May 6, 2015.

[2] Louis Bacani, “Aquino: Beneficial if Japan can defend allies under attack,” Philstar.com, Jun. 24, 2014, http://www.philstar.com/headlines/2014/06/24/1338501/aquino-beneficial-if-japan-can-defend-allies-under-attack.

[3] Rosemarie Francisco, Manuel Mogato, Linda Sieg, Tim Kelly, and Nobuhiro Kubo, “Japan steps up maritime engagement with Philippines, Vietnam,” Reuters, May 12, 2015; “Japan – Indonesia Joint Statement: Towards Further Strengthening of the Strategic Partnership Underpinned by Sea and Democracy,” Ministry of Foreign Affairs of Japan, Mar. 23, 2015; Mitsuru Obe, “Japan Reaffirms Economic Ties With Thailand,” Wall Street Journal, Feb. 9, 2015; Bagus BT Saragih, “Indonesia and Japan improve military ties,” Jakarta Post, Jan. 30 2013.

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Digging In: Land Reclamation and Defenses in the South China Sea

The U.S. Department of Defense’s latest assessment of the Chinese military provided new detail on China’s land reclamation efforts on several of the islets that it occupies in the South China Sea.  These include Fiery Cross Reef, Gaven Reef, Johnson South Reef, Mischief Reef, and Subi Reef in the Spratly archipelago.  By December 2014, the report estimated that China had reclaimed as much as 500 acres of new land, creating full-fledged islands where only coral reefs or sand spits existed before.  Since then, China has only accelerated its efforts, expanding the total land area that it has reclaimed to 2,000 acres and building military facilities, ports, and at least one airstrip on the islands.[1]

China is not alone in reclaiming land in the Spratly Islands.  Though dwarfed by the massive scale of China’s efforts, Vietnam’s land reclamation work has recovered a total of 21 acres of land on West London Reef and Sand Cay.  Satellite imagery shows that not only are the two islands larger, but that Vietnam has constructed defensive positions and gun emplacements on them.[2]

Meanwhile, Taiwan is carrying out a more modestly-paced land reclamation effort on Itu Aba Island—the largest natural island in the Spratly archipelago—reclaiming roughly five acres of land.  By the end of this year, Taiwan plans to complete a large wharf that can accommodate its frigates and coast guard cutters.  Eventually, it hopes to extend the island’s runway and deploy P-3C maritime patrol aircraft there.[3]

Hence, China regards criticism from Southeast Asian countries over its island-building activities as a case of the pot calling the kettle black.  China’s Ministry of Foreign Affairs recently shot back at its most vocal critic, the Philippines, which it claims “has conducted large-scale construction of military and civil facilities, including airports, ports and barracks on [Philippine-occupied] islands for many years.”  As a result, China called upon the Philippines to end its “malicious hyping and provocation.”[4]

Accusations aside, bigger islands that are bristling with weapons will not settle the disputes in the South China Sea.  No doubt military installations on the islands can be useful.  They can improve the ability of claimants to monitor and rapidly respond to incidents in the area.  And ultimately, they serve as a tripwire against hostile action.  But further fortifying the islands makes them only marginally more secure.  However strong an island’s defenses are, they are inherently vulnerable.

If push comes to shove, an island’s defenses can exact a toll on an attacker, especially if they are armed with anti-ship or anti-air missiles.  But eventually they will be lost without control of the sea and air around them.  A determined attacker that dominates both can always overcome an island’s defenses, no matter how skillful their defenders are.  Only superior naval and air power can ensure the safety of island outposts.  On that score, China has its rivals beat at the moment.

There once was a time when claimants in the South China Sea vied to demonstrate how their occupied islets met certain criteria to be considered islands under international law.  That way they could claim the rights to exclusive economic zones around their specks of land.  Today, a growing list of claimants, chief among them China, would rather build artificial islands than quibble over the finer points of international law.  There is an out-and-out scramble to establish de facto zones of control and land reclamation is part of that.

[1] Office of the Secretary of Defense, Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2015 (Washington, DC: U.S. Department of Defense, May 2015), p. 72; James Hardy, Sean O’Connor, and Michael Cohen, “China’s first runway in Spratlys under construction,” Jane’s Defence Weekly, Apr. 16, 2015.

[2] Gordon Lubold and Adam Entous, “U.S. Says Beijing Is Building Up South China Sea Islands,” Wall Street Journal, May, 9, 2015.

[3] Gavin Phipps and James Hardy, “Taiwan to deploy P-3Cs to Spratlys,” Jane’s Defence Weekly, Apr. 21, 2015.

[4] Ben Blanchard and Manuel Mogato, “China says Philippines violating South China Sea code,” Reuters, May 5, 2015.

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