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MARCH 2020
Double-Edged Aid:
China’s Strategy to Gain Influence
through Regional Assistance
DR. LISELOTTE ODGAARD
SENIOR FELLOW, HUDSON INSTITUTE
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© 2020 Hudson Institute, Inc. All rights reserved.
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ABOUT HUDSON INSTITUTE
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Cover: People walk past the abandoned Chinese-funded light rail project in Kazakhstan’s capital city,
Nur-Sultan (formerly Astana). Construction was suspended after the city government disagreed to the loan
terms offered by China’s state-owned Development Bank. (Joel van Houdt For The Washington Post via
Getty Images)
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MARCH 2020
Double-Edged Aid:
China’s Strategy to Gain Influence
through Regional Assistance
DR. LISELOTTE ODGAARD
SENIOR FELLOW, HUDSON INSTITUTE
 URU, Alm.del - 2019-20 - Bilag 186: Endelig arbejdsrapport m.m. fra dansk sekunderet forsker ved Hudson Institute
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AUTHOR
Liselotte Odgaard is a senior fellow at Hudson Institute. Her
work focuses on maritime security, China’s foreign and security
policy, U.S.-China-Europe relations, and the international
politics of the Arctic.
Dr. Odgaard has been a visiting scholar at institutions such as
Harvard University, the Woodrow Wilson International Center for
Scholars, and the Norwegian Nobel Institute. She is the author
of numerous monographs, edited books, peer-reviewed articles,
and research papers on Chinese and Asia-Pacific security, and
she is a frequent commentator on these issues in the media.
She regularly participates in policy dialogues such as the Arctic
Circle Assembly in Iceland and the Xiangshan Forum in Beijing.
She received her bachelor’s, master’s, and doctoral degrees in
political science from Aarhus University in Denmark, as well as
a master’s degree in international studies from the University of
Warwick in the UK.
The author would like to thank Annika Hemdal and Jack
Ramsey from Hudson Institute for their invaluable contributions
to producing this report. Any errors or omissions remain the
sole responsibility of the author.
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TABLE OF CONTENTS
Introduction
China’s Regional Development Approach
Central Asia: Accommodating Russian Interests
Southeast Asia: China’s Charm Offensive
East Africa: Interlocking Chinese Economic and Security Concerns
The Arctic: Testing the Waters
Conclusion
6
9
12
16
21
25
30
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INTRODUCTION
Throughout most regions of the world, China’s regional
development strategy recalls Janus, the ancient Roman god who
was often portrayed with two faces. Like Janus, as China seeks
to expand its global influence, its regional aid policies are driven
by dual motivations – to help under assisted regions but also to
serve Beijing’s political, economic, and environmental interests
while undermining those of competing global powers. This
Janus-headed approach looks for opportunities that developing
countries often believe have been neglected by traditional aid
institutions and Western countries including the United States.
Photo Caption: Officials visit a construction site for the China-backed
given China’s financial and diplomatic clout.
1
Its development
policy is rooted in the Belt and Road Initiative, a global
strategy that links the world’s regions through hard and soft
infrastructure. Asia, Africa, and Europe are targets for China’s
development strategy and, in turn, key to understanding the
consequences of China’s emergence as a global development
provider. China addresses key regional concerns, thereby
promoting a benevolent self-image. China nurtures recipient
country–identified needs previously neglected by Western
China pursues its global interests by creating situations in which
other states feel that conceding to Beijing’s interests is prudent,
East Coast Rail Link project in Dungun, Malaysia on July 25, 2019.
(Rushdi Samsudin/AFP via Getty Images)
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Figure 1: Chinese Aid Flows by Destination Region
East Africa
$20B
Central Asia
South East Asia
CHINA’S JANUS-HEADED
APPROACH CAPITALIZES ON
DEVELOPING COUNTRIES THAT
HAVE BEEN NEGLECTED BY
TRADITIONAL AID INSTITUTIONS
$10B
0
2000
chart does not include aid to other regions.
INFORMATION SOURCE: AXEL DREHER ET AL.,
AID, CHINA, AND GROWTH: EVIDENCE
FROM A NEW GLOBAL DEVELOPMENT FINANCE DATASET
(WILLIAMSBURG, VA:
AIDDATA, 2017), HTTPS://WWW.AIDDATA.ORG/DATA/CHINESE-GLOBAL-OFFICIAL-
FINANCE-DATASET
FIGURE SOURCE: HUDSON INSTITUTE
2014
Note: Due to debt forgiveness on development loans, some aid may be counted twice. This
AND WESTERN NATIONS,
ALLOWING CHINA TO ESTABLISH
A FOOTHOLD IN EAST AFRICA AT
THE INTERSECTION OF THE INDIAN
donors, but such developmental nurturing ultimately serves
Chinese economic, environmental, and security interests.
This report addresses China’s approach to development in Central
Asia, Southeast Asia, East Africa, and the Arctic. China has worked
through the Shanghai Cooperation Organization to meet Russian
demands for continued regional primacy in Central Asia, helping
Beijing foster economic and social dominance, access strategic
energy resources, and treat the Uyghur minorities as a problem
of terrorism rather than a development issue. In Southeast Asia,
China has worked through the Association of South-East Asian
Nations (ASEAN) to meet regional demands for soft and hard
infrastructure to legitimize China’s growing strategic presence.
China is therefore able to undermine the regional economic and
security foothold of the US alliance system and challenge the
interpretations of the Law of the Sea that legitimizes the military
presence and activities of extra regional powers. In East Africa,
China has cooperated with the African Union (AU) and the East
African Intergovernmental Authority on Development (IGAD) to
address regional demands for hard and soft infrastructure without
political conditions, to link antipiracy problems to problems of
Chinese development aid has become an increasingly important
source of finance in East Africa, Central Asia and Southeast Asia
since 2000 when China’s development aid contributions were
negligible, as figure 1 illustrates. The Arctic is not listed as a
recipient of Chinese development assistance because the region’s
states are listed as developed countries. Nevertheless, China
contributes financial assistance to areas such as environmental
concerns that can be seen as forms of development assistance.
This report argues that China’s approach to developmental
aid is driven by projects that allow China to address region-
wide concerns while advancing long-term Chinese objectives.
OCEAN AND THE MIDDLE EAST.
poverty, and to mediate local civil wars. This has helped China
establish an economic and strategic foothold at the intersection
of the Indian Ocean and the Middle East, projecting power far
from its shores. In the Arctic, China has established research
stations that function as both environmental research laboratories
and military surveillance stations.
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BY TAKING GRADUAL STEPS,
CHINA IS ABLE TO TRANSITION
FROM WHAT APPEARS TO BE
A LIMITED AND BENEVOLENT
PRESENCE INTO A STRATEGIC
PRESENCE THAT SERVES ITS
strategic presence that serves its own economic and security
interests. To counter this Janus-headed approach, recipient
countries need to establish mechanisms that prevent China
from gaining unwanted political leverage through developmental
aid. To be effective, such mechanisms require region-wide and
global approaches that put small-scale Chinese engagement
into a larger strategic context. While focusing on the needs of
their own immediate region, even smaller powers should think
globally about how to assist in countering Chinese initiatives that
undermine the liberal world order.
This report first looks at the origins, means, and objectives
OWN ECONOMIC AND SECURITY
INTERESTS.
By taking gradual steps, China is able to transition from what
initially appears to be a limited and benevolent presence into a
of China’s institutional approach to regional development.
Second, it investigates how China has applied its development
approach in the four regions of Central Asia, Southeast Asia,
East Africa and the Arctic. Third, it discusses the policy
implications of China’s institutional approach to regional
development.
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CHINA’S REGIONAL
DEVELOPMENT APPROACH
Distinguishing Chinese development assistance from its trade and
investment practices is difficult.
2
The blurred lines between these
sectors indicate that Chinese interests are always an integral part
of China’s overseas engagement, even if the interests emerge
among the application of aid and the needs of recipient countries.
The Chinese Communist Party (CCP) is the final decision maker on
Chinese overseas development assistance.
3
The decision-making
process, the interaction with recipient countries, and the financial
arrangements underpinning Chinese aid programs are highly
opaque.
4
The secrecy of Chinese aid programs and their overlap
with commercial activities make assessment of whether official
Chinese development aims are implemented in practice difficult.
Officially, Chinese aid policy rests on three principles. First,
officially China claims that it adheres to a policy of non-interference
Photo Caption: Myanmar State Counsellor Aung San Suu Kyi talks
with Chinese Premier Li Keqiang during a signing ceremony at the
Great Hall of the People in Beijing on May 16, 2017. (Nicolas Asfouri/
AFP via Getty Images)
in the domestic affairs of other countries, attaching no political
conditions to aid. China argues that recipient countries have a
right to determine their own development path.
5
For example,
Beijing often points out that Africa and the Arab world decide
how to manage their security problems, provided they respect
the United Nations (UN) Charter, since they have to live with the
consequences of their decisions.
6
However, in practice, China
exercises considerable influence behind the scenes, translating
economic power into political influence and thus breaching its
official policy of non-interference. China is well-positioned to use
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Figure 2: Composition of Chinese Aid by Type
by monetary value in current USD, 2000-2014
Debt
forgiveness
1%
Other
6%
Export
credits
8%
Grants
2%
CHINESE DEVELOPMENT
ASSISTANCE IS MOSTLY GIVEN AS
LOANS RATHER THAN GRANTS,
DEBT FORGIVENESS OR EXPORT
CREDITS, OFTEN LEAVING
RECIPIENT COUNTRIES WITH
LARGE DEBTS.
such as ASEAN and the AU, offer China more policy legitimacy
than if development aid was based on Chinese understandings
Loans
83%
Note: Due to debt forgiveness on development loans, some aid may be counted twice
SOURCE: AXEL DREHER ET AL.,
AID, CHINA, AND GROWTH: EVIDENCE FROM A NEW
GLOBAL DEVELOPMENT FINANCE DATASET
(WILLIAMSBURG, VA: AIDDATA, 2017),
HTTPS://WWW.AIDDATA.ORG/DATA/CHINESE-GLOBAL-OFFICIAL-FINANCE-DATASET
of legitimate and illegitimate international conduct. The UN
system represents the most universally recognized standard of
civilization in international law and, as such, has become part
of China’s calculus of legitimacy.
8
If China can obtain legitimacy
from the UN system for development policies that recast
interpretations of international law, China can receive the green
light to gradually change the rules of the UN system from within
and to acquire capacities that could be used for other military-
economic power as political leverage since, as shown in Figure
2, Chinese development assistance is mostly given as loans
rather than grants, debt forgiveness or export credits, often
leaving recipient countries with large debts. Since this influence
is exercised behind closed doors, evidence is circumstantial.
For example, China is believed to have persuaded Kazakhstan’s
government to allow foreigners to buy land in the country to
facilitate a growing permanent Chinese presence, but no hard
evidence is available.
7
Second, Chinese overseas development assistance is officially
based on the UN system. Embedding development aid in
adherence to the UN Charter and coordinating aid policies
through regional institutions recognized as part of the UN system,
strategic purposes not endorsed by the UN. Specifically, the
UN endorsed China’s participation in anti-piracy and capacity-
building efforts off the Horn of Africa to ensure the safe delivery
of food aid and the promotion of stability and security.
9
China
has used its role in UN anti-piracy efforts to implement its version
of the Responsibility to Protect civilians against atrocity crimes
in East Africa, which includes using peacekeeping troops only
for defensive purposes such as the protection of civilians and
government buildings. In practice, this allows China to use
troops for protection of the contested government forces of
South Sudan president Salva Kiir, which have participated in
attacks on civilians.
10
In 2017 China also established a naval
base in Djibouti to fill a need for an anti-piracy logistics hub.
However, the base does not allow foreigners access, and it can
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be used by the Chinese military as a strategic hub for access to
the Indian Ocean.
11
Third, China’s Belt and Road Initiative (BRI) is an economic
vision for development and growth encompassing aid to
developing countries and foreign direct investment in developed
economies. China’s foreign aid is slanted toward countries
that are part of the BRI. In this context, China has expanded
the scale of foreign aid and focused on infrastructure, climate
change, poverty reduction, sustainable development, security
capacity, and peacebuilding. China is developing its own
financial mechanisms for supporting its aid policy, such as the
Asian Infrastructure Investment Bank (AIIB) and the Export-
Import Bank of China (EXIM Bank China).
12
China’s awarding of
development assistance to countries that have signed on to its
economic vision allows the nation to spread its version of world
order in the developing world, demonstrating that Chinese
interests connect to the interests of recipient countries. For
example, Chinese contributions to peacebuilding in Myanmar
have been introduced as China’s responsible involvement in
protracted local conflicts, as putting its international reputation
on the line to ensure peace and stability in a neighboring country.
However, the other side of Beijing’s peacebuilding is a lack of
coordination with the contributions of the other members of the
international community. In addition, Chinese peacebuilding has
focused on protecting Myanmar’s government from criticism
and punitive action in the UN Security Council, demonstrating
concern for protecting political authority rather than for the
human rights of the Rohingya minority in armed conflict with the
Naypyidaw administration.
13
general policy on development assistance within the UN
system and among the regional institutions that subscribe to
the principles of the UN Charter; and China strengthens its
reputation as a responsible power working on the ground to
implement its principles for development aid. This is a Janus-
headed approach to development, however, since these
policies also allow China to build unprecedented domestic
political influence, regional military-strategic positioning,
and a global sphere of influence that undermines the rules-
based order that China claims to defend. The following
sections detail how China has pursued that development
approach in Central Asia, Southeast Asia, East Africa, and
the Arctic.
CHINESE PEACEBUILDING HAS
FOCUSED ON PROTECTING
MYANMAR’S GOVERNMENT
FROM PUNITIVE ACTION IN
THE UN SECURITY COUNCIL,
DEMONSTRATING CONCERN
FOR PROTECTING POLITICAL
AUTHORITY RATHER THAN FOR
THE HUMAN RIGHTS OF THE
China wins local popularity by demonstrating respect for
local concerns; Beijing earns legitimacy by formulating its
ROHINGYA MINORITY
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CENTRAL ASIA:
ACCOMMODATING RUSSIAN INTERESTS
After the Central Asian states of Kazakhstan, Kyrgyzstan,
Uzbekistan, Turkmenistan, and Tajikistan became independent
in 1991 following the implosion of the Soviet Union, Russia
continued to dominate regional security and influence the
countries’ economic and political dynamics. China was looked
upon with suspicion by Russia and by the Central Asian
republics who feared the consequences of Chinese migration
and economic influence on their societies. Fear of Chinese
immigration is deeply rooted in the region. In ancient times,
China’s coming to Central Asia was associated with the end
of the world. During the tsar and Soviet periods, the borders
to China were closed.
14
In the post–Cold War period, China
Photo Caption: Zharqynbek Otan looks over his permit for permanent
residence in the Republic of Kazakhstan with his six-year-old son in
their home in Almaty, Kazakhstan. Otan spent more than two years
in various forms of detention in Xinjiang, China’s massive Western
region bordering Central Asia, including one of the country's notorious
re-education camps. (Izturgan Aldauyev for The Washington Post via
Getty Images)
quickly moved to demonstrate its seriousness about its non-
interference policy by resolving all border disputes with Russia
and the Central Asian republics, proposing to equitably divide
disputed territory.
15
This way of solving the disputes also
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allowed China to signal that weak and strong powers would be
treated equally in dealing with sensitive issues such as territorial
conflicts. Thereby, Beijing demonstrated adherence to the UN
Charter principle that states are legal equals.
China’s main interest in Central Asia is to provide reassurance
that Beijing accepts Moscow’s position as the principal source
of military, economic, and political guidance in the region.
Russia has embraced China’s growing presence in Central Asia,
as indicated by their agreement to coordinate BRI initiatives with
Russia’s regional economic pet project, the Eurasian Economic
Union (EEU). The EEU was established as a free-market initiative
in 2014 by Russia, Kazakhstan, and Belarus and now also
encompasses Armenia and Kyrgyzstan. Moscow recognizes
that Chinese economic activities benefit an ailing Russian
economy unable to unilaterally set the Central Asian economies
on a positive development trajectory and secure regional peace
and stability. Moscow has adopted an increasingly positive
attitude toward the BRI initiative because Russia must look to
China for economic opportunity.
16
For the Central Asian economies, China’s BRI is a mixed
blessing. However, few other countries have shown interest
in investing substantially in the region, leaving China with
leeway to advance its regional economic and social roles.
Unresolved issues give rise to concern that China’s economic
engagement will benefit China rather than Central Asia. One
issue is Central Asian water shortages. China is an upstream
country for many of Asia’s rivers. Economic development in
the Chinese Xinjiang province has increased China’s diversion
of water from the Irtysh and Illy Rivers, engendering water
shortages in Kazakhstan.
17
Chinese economic development
projects in Central Asia indirectly contribute to water conflicts
because such projects alter the need for supplies such as
electricity. With regard to locally produced products, cheap
Chinese products influence the economic structures in Central
Asia because the products created by some sectors are not
able to compete with Chinese imports. Capital- and labor-
intensive sectors are challenged by the competition, while
those in the energy industry benefit.
18
Adding to this concern
is the worry that Chinese investments in transportation
infrastructure will bring economic benefits to Europe, whereas
Central Asia might merely become a transit route.
19
Moreover,
China’s economic influence means that approximately half the
external debt of Central Asian countries such as Kyrgyzstan
is owed to China resulting from Chinese loans–based
investments, making those countries prospective dependents
on Beijing.
20
Chinese BRI initiatives influence the regional balance of power,
unintentionally encouraging revivals of regional rivalries, for
example between the two large regional powers Kazakhstan
and Uzbekistan. Kazakhstan holds a special place in the BRI
initiative. Together with Pakistan, Kazakhstan was one of two
test cases of the BRI initiative. Chinese President Xi Jinping
announced the onshore aspect of BRI in 2013 in Kazakhstan.
Worrying about Kazakhstan’s growing regional position as a
result of Chinese investments, Uzbekistan and Kyrgyzstan
have pushed for the implementation of projects such as the
stalled China-Kyrgyzstan-Uzbekistan railway network.
21
At
APPROXIMATELY HALF THE
EXTERNAL DEBT OF CENTRAL
ASIAN COUNTRIES SUCH AS
KYRGYZSTAN IS OWED TO CHINA
RESULTING FROM CHINESE LOANS–
BASED INVESTMENTS, MAKING
THOSE COUNTRIES PROSPECTIVE
DEPENDENTS ON BEIJING.
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times, Central Asia’s citizens air their concerns about China.
For example, the 2016 land reforms in Kazakhstan, allowing
foreigners to buy land in the country, spurred anti-Chinese
protests over the prospect of a permanent Chinese presence.
22
Among Central Asia’s populations, BRI has demonstrated
that China’s economic development approach brings not
only economic opportunities but also more corruption and
inequality.
23
CHINA PASSED A LAW IN 2015
ALLOWING THE PEOPLE’S
LIBERATION ARMY TO OPERATE
ABROAD ON COUNTERTERRORISM
MISSIONS, LEADING TO AN
The border settlements negotiated between China, the Central
Asian states, and Russia in the 1990s formed the basis for
creating the institutional framework known as the Shanghai
Five. In 2001, the grouping became the treaty-based institution
the Shanghai Cooperation Organization (SCO); the institution
was embedded in the UN system and created a framework for
continuous coordination between Central Asian leaders.
24
In
addition to China, Russia, and the five Central Asian states, India
and Pakistan became members in 2017. Beijing has attempted
to steer the SCO’s activities toward increasing economic
cooperation. However, progress has been negligible because
Russian and Central Asian state leaders remain worried about
becoming economically dependent on China. At the same time,
Russian and Central Asian state leaders are concerned that
China invests less than it promises, or at least is slow to deliver
on promises.
25
Despite Russia’s guarded approach to China, seen from a
Central Asian perspective, the strategic partnership between
Beijing and Moscow is trending upward. Sino-Russian
cooperation increasingly enables them to dominate the region,
with Beijing and Moscow coordinating policies to avoid rival
interests. China’s successful rapprochement with Russia raises
concerns in Central Asia about an emerging quasi-alliance
within the SCO between the two regional great powers,
focused on control over local elites rather than on building a
genuine partnership.
26
The rapprochement also diverts the
SCO agenda toward the common Chinese-Russian concern
about regional security.
27
Rather than targeting radicalized elements among the Uyghur
population, China is targeting the Muslim population as a
whole, establishing a reeducation camp system in Chinese
Xinjiang and tight surveillance that targets Uyghurs, Kazakhs,
Kyrgyz, and Huis to force them to abandon Islamic religion and
culture.
29
The systematic Chinese surveillance and persecution
of ethnic Muslim groups have been termed a scary engineering
project carried out to create a uniform human being loyal to the
CCP.
30
China’s attempt to control Uyghurs extends into Central
In particular, the SCO has provided a platform for China to
crackdown on Uyghurs, who live primarily in Chinese Xinjiang
in northwestern China and in Kyrgyzstan, Kazakhstan, and
Uzbekistan. Joint SCO exercises have increasingly focused on
counter-terrorist scenarios, and in 2015 China passed a law
allowing the People’s Liberation Army (PLA) to operate abroad
on counterterrorism missions. The rise of Daesh in neighboring
Afghanistan and its links to radical Uyghur Islamists and to
Taleban splinter groups are seen as core threats against national
sovereignty and unity by China and Russia. This has led to an
increase in Russia’s and China’s security and military presence
in Central Asia.
28
INCREASE IN RUSSIA’S AND
CHINA’S MILITARY PRESENCE
IN CENTRAL ASIA.
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Asia. Regional economic dependence on China causes local
elites to cooperate with China on cracking down on Uyghurs.
For example, they accept that Chinese security forces operate
in their territories, arresting Uyghurs, sending Chinese Uyghurs
back to China, and preventing former detainees from speaking
to journalists.
31
CHINA’S EFFORTS TO CONTROL
UYGHURS EXTENDS ACROSS
CENTRAL ASIA. DUE TO BEIJING’S
ECONOMIC INFLUENCE IN THE
China’s development policy in Central Asia has focused on
convincing Russia to work out a division of labor to facilitate
Beijing’s rise as a major regional economic power. China has
initiated intergovernmental coordination of counter-terrorist
measures through the SCO, allowing it to translate economic
leverage into regional cooperation on its crackdown on Muslims
in violation of basic human rights.
REGION, CHINESE SECURITY
FORCES CAN ARREST, DETAIN,
AND TRANSPORT UYGHURS TO
XINJIANG CAMPS.
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SOUTHEAST ASIA:
CHINA’S CHARM OFFENSIVE
In Southeast Asia, China is facing regional powers that straddle
the whole range of development stages: from poor countries
such as Laos, across middle-income countries such as
Thailand, to highly developed economies such as Singapore.
The region’s major power is Indonesia, which subscribes to
a policy of non-alignment, keeping a distant and balanced
relationship with all great powers. Indonesia has refrained from
pursuing hegemonic policies, instead opting to maintain peace
and stability through regional cooperation within ASEAN, which
has encompassed all Southeast Asian countries since 1999. In
this complex environment, Beijing’s strategy since the 1990s
has been to embrace existing cooperation mechanisms by
gradually expanding relations with ASEAN while slowly revising
Photo Caption: Indonesian Muslims protest against China’s oppression
of Uyghurs in front of the Embassy of the People's Republic of
China in Jakarta, Indonesia on December 21, 2018. (Anton Raharjo/
NurPhoto via Getty Images)
those mechanisms to better suit Chinese interests in becoming
the leading regional power.
Beginning in the 1990s, China pursued a comprehensive policy
of enhancing economic and political ties with Southeast Asia,
overcoming the anti-communist sentiment among Southeast
Asian political elites and creating a platform for cooperation.
China’s role during the 1997 financial crisis, which entailed
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SINCE THE 1990S, CHINA
HAS EMBRACED EXISTING
COOPERATION MECHANISMS
WHILE SLOWLY REVISING THOSE
MECHANISMS TO BETTER SUIT
CHINESE INTERESTS IN BECOMING
THE LEADING REGIONAL POWER
investment and as markets for exports.
34
Southeast Asia’s
reception of China’s BRI has therefore also been mixed.
Southeast Asia is important to China’s plans to develop an Asian
transportation and telecommunications network. The region’s
geographic proximity and role as an important export market
for Chinese goods has driven China’s interest in expanding
its physical presence in Southeast Asia. The formation of the
ASEAN economic community in 2015 brought Southeast
Asian economies together as a single market and production
base, and BRI plugs into this community by offering further
integration both internally in ASEAN and externally with China
by developing infrastructure.
35
About 50 percent of Chinese official financing was directed to
IN SOUTHEAST ASIA.
stabilizing the Chinese renminbi and China’s unconditional offer
of economic aid, helped push regional economic recovery and
build trust between China and Southeast Asia. Normalization
of relations were codified by China’s signing of a China-ASEAN
Free Trade Area agreement in 2002 and by China’s accession
to ASEAN’s security pact, the Treaty of Amity and Cooperation
(TAC), in 2003.
32
The China-ASEAN agreement to sign a
nonbinding declaration of conduct for the South China Sea
in 2002 committed the parties to exercise self-restraint and
to avoid activities that would complicate or escalate territorial
and maritime disputes. This was a major step toward ASEAN
acceptance of China as a Southeast Asian power with a
physical presence in the regional maritime heartland, although
China’s presence had begun violently with China’s winning of
the 1974 Chinese-Vietnamese Battle of the Paracel Islands.
33
China’s ambition to become the dominant Southeast Asian
power met with some challenges because of ASEAN’s
concern to maintain multiple economic ties. India, Australia,
and New Zealand offer a counterbalance to ASEAN countries’
dependence on Chinese raw materials, and Japan and South
Korea offer alternatives to China as sources of foreign direct
Southeast Asia between 2000 and 2016, whether as overseas
development assistance or less concessional official finance.
Southeast Asian countries that are skeptical of growing
economic dependence on China, such as the Philippines and
Myanmar, are recipients of large infusions of Chinese official
financing.
36
Government leaders are in the driver’s seat when
making decisions on China’s checkbook diplomacy. More
than Japanese and Western alternatives, China often offers
better and more immediate financial rewards with fewer strings
attached. Since Southeast Asian leaders must also find ways
to accommodate neighboring China’s growing power, Beijing
ends up being the preferred economic and financial partner in
many cases.
Malaysia is a good example of this dynamic. With 14.6 billion US
dollars of BRI investments from 2014 to 2016, Malaysia is the
second-largest recipient of BRI funds, after Singapore. In May
2018 Mahathir Mohammad surprisingly won the presidential
election, in what was widely seen as a popular vote against
the Razak administration’s embrace of BRI projects. Among
the complaints is that China does not benefit local economies
because the nation does not hire local labor and ignores
labor regulations. Beijing also creates monopolies for Chinese
business enterprises, often coercing the recipient country to
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Figure 3: Composition of Chinese Aid to Different Regions
 
LOANS
GRANTS
$588,161,139
$237,091,625
$1,094,524,120
EXPORT CREDITS
$4,712,248,522
$857,604,975
$1,659,638,699
DEBT
FORGIVENESS
$445,000,000
-
$386,617,492
OTHER
$4,554,985,846
$600,000
$339,503,359
TOT
$44,519,141,149
$29,588,812,358
$14,435,067,496
South East Asia $34,218,745,642
Central Asia
East Africa
$28,493,515,758
$10,954,783,826
FIGURE SOURCE: AXEL DREHER, ANDREAS FUCHS, BRADLEY PARKS, AUSTIN M. STRANGE, AND MICHAEL J. TIERNEY,
AID, CHINA, AND GROWTH: EVIDENCE FROM A NEW GLOBAL
DEVELOPMENT FINANCE DATASET
(WILLIAMSBURG, VA: AIDDATA 2017), HTTPS://WWW.AIDDATA.ORG/DATA/CHINESE-GLOBAL-OFFICIAL-FINANCE-DATASET
invest in projects and incur debts that are translated into political
influence. Figure 3 shows that grants, export credits and debt
forgiveness play a minor role in Chinese development assistance
compared to loans that saddle recipient countries with large
debts. Shortly after his election in August 2018, Mahathir
cancelled three projects with China worth an estimated 22 billion
US dollars.
37
However, after Mahathir renegotiated the costs
of one of the projects, the East Coast Rail Link, lowering the
costs by almost one-third, it was relaunched in 2019. Malaysia’s
ability to decrease the costs of the railway project confirms that
Southeast Asia is not an easy region for Chinese inroads. These
countries have alternatives that they can turn to, with Japan as
the biggest investor in Southeast Asian infrastructure. In 2019,
Japan had pending infrastructure projects worth $367 billion
which supersedes by far China’s $255 billion investments.
Moreover, Japanese investments are strategic—for example,
targeting Vietnam and the Philippines, which have conflicting
relations with China and are looking for alternative economic
partners, defying dependency on China.
38
On the other hand,
Beijing’s willingness to recalibrate BRI, by lowering BRI project
costs for the recipient country and by addressing environmental
concerns as part of projects, makes China an attractive partner
for realizing Southeast Asian countries’ industrialization plans.
SOUTHEAST ASIAN COUNTRIES
THAT ARE SKEPTICAL OF
China continues to put a high premium on working with ASEAN to
GROWING ECONOMIC
DEPENDENCE ON CHINA, SUCH
AS THE PHILIPPINES AND
MYANMAR, ARE ALSO THE MAJOR
RECIPIENTS OF CHINESE OFFICIAL
FINANCING.
18 | HUDSON INSTITUTE
address region-wide economic and security concerns, earning
it kudos at a time when the United States sent only its national
security advisor to the fifteenth ASEAN summit held in October
2019 in Bangkok—a diplomatic slap in the face of a status-
conscious region.
39
The prospective Regional Comprehensive
Economic Partnership (RCEP) which includes China, Japan,
South Korea, Australia, India and New Zealand, but not the
United States, is negotiated within the ASEAN context. If the
agreement is concluded under Vietnam’s chairmanship in
2020, provided Indian reservations are accommodated, ASEAN
will be positioned at the center of huge supply and demand
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chains, and strengthen China’s image as a power willing to
accommodate Southeast Asian economic development needs.
GRANTS, EXPORT CREDITS
AND DEBT FORGIVENESS PLAY
Southeast Asia is a demanding partner for China. Hence, Beijing
must accommodate Southeast Asian demands if China wishes
to continue to increase its regional role. Beijing’s long-standing
willingness to address Southeast Asian concerns about China in
an ASEAN context gives it an upper hand because in the eyes
of Southeast Asia, this demonstrates that Beijing is prepared to
address Southeast Asia as a group, recognizing that the region
constitutes a diplomatic unity. Moreover, Southeast Asia is able
to attract other partners, as demonstrated by Japan’s significant
involvement in regional infrastructure projects, pushing China
into showing greater concern for regional views and interests.
For example, China’s peace-building efforts in Myanmar have
included strong support for the Naypyidaw administration’s ability
to handle the crisis in the northern Rakhine province. Myanmar’s
government has conducted violent crackdowns on the Muslim
Rohingya minority, which, according to a 2017 UN report,
constitutes genocide. China has major investments in Rakhine,
such as the Kyauk-Phyu port, the starting point of an oil and
gas pipeline and a railroad link from Rakhine to Yunnan in China.
China’s economic stakes in Rakhine encourage Beijing to prioritize
stability and non-interference rather than demand protection of
the human rights of Rohingyas. Malaysia and Indonesia, both
with large Muslim populations, look critically upon the alleged
stabilization efforts in Myanmar. Despite ASEAN’s commitment
to the principle of non-interference in the domestic affairs of other
states, Kuala Lumpur and Jakarta pushed the 2018 East Asian
Summit (EAS) (with China and Myanmar as members) to include
in its summit statement the humanitarian situation in Rakhine as
a matter of concern. During the November 2019 EAS summit,
heated debates reportedly took place on the Rohingya issue.
40
China’s establishment as a Southeast Asian power in the South
China Sea is a greater concern than ever for regional powers. The
region’s maritime heartland is now not only marred by conflicts
over competing territorial claims in the maritime space but it is also
an arena for US-Chinese strategic competition, giving rise to the
militarization of the area. China has never clarified its claim, but
maps presented by official agencies indicate that China claims
sovereignty over approximately 85 percent of the sea. Since the
1990s, China and the ASEAN member states have engaged in
dialogue on the South China Sea, debating disagreements and
possibilities for cooperation. In the 1990s, China was reluctant to
discuss a code of conduct, fearing that such a code could lock
it into obligations that would constrain its aspirations for greater
regional influence. However, as China’s economic leverage
has grown, so has its proactiveness in pursuing its maritime
interests.
41
In recent years, China has played a dominant role
in code-of-conduct negotiations that are to be completed by
2021, practicing a divide-and-conquer tactic that utilizes the
lack of agreement among Southeast Asian countries on how
to deal with Beijing to advance Chinese interests. In 2017,
Beijing was assisted by the Philippines to avoid the mention of
Chinese land reclamation projects in the South China Sea in the
thirtieth ASEAN Summit statement.
42
Recent Chinese advocacy
to restrict the rules of innocent passage, which currently allow
extra-regional military vessels and aircraft to transit the South
China Sea as international waters, poses worrying prospects for
Chinese demands to restrict freedom of movement for countries
outside the region in one of the world’s key strategic seas. If
A MINOR ROLE IN CHINESE
DEVELOPMENT ASSISTANCE
COMPARED TO LOANS THAT
SADDLE RECIPIENT COUNTRIES
WITH LARGE DEBTS.
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left unchallenged, Chinese encroachments on freedom rights
in the high seas will also have global implications for future
interpretations of the law of the sea.
43
China’s development policy in Southeast Asia has focused on
demonstrating Beijing’s respect for the regional demand that
the ASEAN nations be approached as a single diplomatic
community with legitimate economic, environmental, and
political interests. China has plugged into regional infrastructure
deficiencies to assist in re-industrializing the region and has
been careful to address local concerns, such as environmental
issues and infrastructure financing, to nurture its image as a
responsible power. However, on key regional issues where
ASEAN is deeply divided, such as the Rohingya humanitarian
crisis and the South China Sea disputes, China has translated
economic power into political leverage, supporting those
governments that advance Chinese interests.
CHINA IS PLAYING A DOMINANT
ROLE IN CODE-OF-CONDUCT
NEGOTIATIONS THAT ARE TO BE
COMPLETED BY 2021, PRACTICING
A DIVIDE-AND-CONQUER TACTIC
THAT UTILIZES THE LACK OF
AGREEMENT AMONG SOUTHEAST
ASIAN COUNTRIES ON HOW TO
DEAL WITH BEIJING’S PRIORITIES.
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EAST AFRICA: INTERLOCKING CHINESE
ECONOMIC AND SECURITY CONCERNS
In the revolutionary heyday of the PRC in the 1950s, China began
to join the competition for influence between the liberal West
bloc and the communist East bloc by supporting independence
movements. One visible expression of Chinese interest was the
building of the Tazara railway in East Africa in 1975.
44
Another
was the attempt to emulate China’s development model of
collective farming and self-reliance, such as Tanzania’s Ujamaa
project, resulting in severe food shortages, just as in China.
Nonetheless, China had a scant presence in East Africa until
the 1990s.
China stepped into the vacuum arising when the United States
and the Soviet Union abandoned their African allies after the
Photo Caption: Members of the Chinese People's Liberation Army
Navy Seventh Escort Task Force participate in a joint drill with
Tanzanian marine corps on March 29, 2011 in Dar es Salaam,
Tanzania. (Xinhua/Gamma-Rapho via Getty Images)
Cold War. Initially, China concentrated on developing economic
relations, predominantly perceiving the region as a market and
a source of raw materials such as oil and minerals, and also
as a source of agricultural products. China’s booming industrial
economic sector needed stable supplies. In East Africa, Sudan
became a major source of oil supplies as China became a net
importer of oil in 1993.
45
In 2009, China surpassed the United
States as Africa’s main trade partner. Between 2000 and 2014,
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CHINA SEES EAST AFRICA AS
EXPERIMENTAL GROUNDS FOR
CHINESE-STYLE MEDIATION IN
CIVIL WARS, AND AS A GATEWAY
THAT ALLOWS THE PEOPLE’S
LIBERATION ARMY TO ACCESS THE
INDIAN OCEAN AND MIDDLE EAST.
China became a major source of official finance. The Chinese
government loaned more than $86 billion to Africa, and East
African countries such as Sudan, Ethiopia, Kenya, and (since
2011) South Sudan have become the top recipients.
46
Beijing has steadily diversified its economic engagement in
East Africa, plugging into needs for hard and soft infrastructure
to finance the construction of railways, roads, ports,
airports, hospitals, schools, and stadiums and to offer cheap
telecommunications solutions.
47
China has comprehensive
economic, security, and strategic interests in East Africa, applying
its BRI strategy across the region as an access strategy for
experimentation with Chinese-style mediation in civil wars and
using the region as an access point to the Indian Ocean and the
Middle East for the People’s Liberation Army (PLA). China has
had a relatively high level of strategic freedom of action in East
Africa. This favorable environment emerged from a low level of
military-strategic US involvement and long-standing diplomatic
and military links between China and East Africa.
48
Despite its significant presence in most of the region, China has
a mixed reputation among the general public in East African
countries. Kenyans tend to hold positive views of China, with
67 percent looking favorably on China.
49
By contrast, the South
Sudanese public harbors largely negative views of China.
50
However, China’s top-down approach to overseas development
and security engagements, focusing on accommodating the
needs of those exercising political power, implies that popular
discontent with Chinese policies has limited influence on
Beijing’s ability to implement them in the fast-growing East
African economies.
Ethiopia is China’s primary economic and strategic partner
in East Africa. Ethiopia hosts and co-finances one of China’s
overseas special economic zones. In the zone, the business
environment is less constrained by administrative procedures
and government financial requirements than elsewhere in the
country, facilitating infrastructure financing and foreign direct
investments in services and institutions. Despite training of local
workers, technical support, and contributions to economic
growth, UN assessments of the special zone have pointed to
problems such as delays in infrastructure and utility services
development, resulting in insufficient access to electricity and
water.
51
China has also made strategic investments in other
East African states. Beijing invests in deep-water ports in
Djibouti, Kenya, and Tanzania. Moreover, China is constructing
a regional rail corridor connecting Kenya, one of the East African
gateways to the maritime silk road running across the Indian
Ocean, with Uganda, Burundi, and South Sudan. China is
financing one in every four East African railway projects despite
the dubious financial viability of some of these.
52
In Burundi,
China has helped fund the construction of a new presidential
palace and an electric power plant. Moreover, 97 percent of
Burundi’s exports to China are duty-free.
53
In South Sudan,
the Chinese state-owned enterprise China National Petroleum
Corporation (CNPC) owns a forty percent stake in South
Sudan’s biggest oil fields and has invested billions of dollars in
oil-related infrastructure such as roads and pipelines.
54
Chinese investments at a time when few countries were
interested in East Africa have pushed regional governments
to accept considerable debts to China.
55
China’s regional
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economic clout is translated into political and security influence.
China recognized South Sudan when it became independent
in 2011, claiming respect for non-interference on the grounds
that the separation of South Sudan from Sudan was voluntary.
However, prominent Chinese academics have pointed out
that China took steps behind the scenes such as imposing
pressure on then Sudanese president Bashir to accept foreign
intervention. This behavior overextends the principle of non-
interference and implies that, in practice, China is not adhering
to its much-noted non-interference policy.
56
China’s has carefully crafted its BRI strategies to be embedded in
the UN system and regional East African multilateral institutions
so as to legitimize growing Chinese influence. China has been
actively involved in diplomatic efforts to end South Sudan’s
civil war by mediating between warring factions. Working with
IGAD (comprising Djibouti, Ethiopia, Somalia, Eritrea, Sudan,
South Sudan, Kenya, and Uganda), China has used economic
development assistance to persuade warring factions to end
hostilities. The peace initiative has focused on finding a middle
ground between the warring factions led by President Salva
Kiir and opposition leader Riek Machar. In April 2016, China
donated US$550,000 and office equipment to the UN-endorsed
ceasefire-monitoring body of South Sudan’s newly formed unity
government. The government came in response to threats
of UN Security Council sanctions in 2015 and did not last. In
2018, the UN Security Council agreed to adopt sanctions, and
it remains to be seen if the peace process, ongoing since 2014,
results in lasting peace.
57
China’s much-publicized diplomatic efforts have done little
to avert humanitarian crisis. Indeed, arguably those efforts
divert attention away from ongoing deadly clashes between
government and opposition forces caused by violence and
displacements. The resulting refugee flows to neighboring
states trigger tensions and critical shortfalls in water, food,
shelter, health, education, and access to arable land. The
UN peacekeeping forces are unable to offer protection of
civilians against atrocities, although the forces were deployed
on a responsibility-to-protect mandate.
58
Meanwhile, China
continues oil production in South Sudan, thereby helping fund
the civil war without much overt criticism of China.
59
China has played a similarly active political role in Burundi.
China supported the 2015 national elections with US$800,000.
The elections were marred by widespread violence, including
killings of regime and opposition leaders, sparked by President
Nkurunziza’s announcement of his candidacy for a third
term in office. The elections were boycotted by much of
Burundi’s opposition and denounced by Western countries as
undemocratic.
60
In 2019, in the run-up to the 2020 elections,
China argued that Burundi should be taken off the UN Security
Council agenda at a time when arbitrary killings, enforced
disappearances, torture, and arbitrary detentions continue to
take place according to the UN.
61
CHINA HAS SOUGHT LEGITIMACY
BY CRAFTING ITS GROWING
Shielded by embeddedness in UN peacekeeping initiatives,
INFLUENCE TO FIT WITHIN THE
FRAMEWORK OF THE UN SYSTEM
AND REGIONAL EAST AFRICAN
MULTILATERAL INSTITUTIONS.
China is playing an increasingly central military-strategic role
in East Africa that emphasizes Chinese rather than regional
interests. In South Sudan, China has played a leading role in
UN peacekeeping. By 2019, China had deployed approximately
one thousand troops as defensive security forces, allowing them
to protect entities such as civilians and government buildings.
62
Despite attempts to appear impartial, Chinese support for
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the national military forces of incumbents, enabling them to
maintain effective control despite contested political power
landscapes, has brought accusations of Chinese interference
in domestic power struggles. Moreover, Chinese peacekeeping
deployments also advance Chinese military interests that
have not been endorsed by the UN. The deployments help
Chinese troops obtain valuable combat experience, providing
opportunities for testing equipment and comparing Chinese
combat readiness to the level of other countries’ armed forces.
These experiences help the PLA assess China’s war readiness
compared with potential adversaries.
China’s establishment of its first permanent naval base in
Djibouti is also not merely a logistics hub for naval operations
supporting Chinese UN-endorsed antipiracy operations in the
Gulf of Aden, the Arabian Sea, and the Indian Ocean. They are
also port facilities that can help China realize plans to enable its
navy to focus on a combination of offshore waters defense and
open-seas protection, and to enhance China’s military-strategic
role in the Indian Ocean and the Middle East, allowing its forces
to operate in defensive and offensive capacities far from the
Chinese mainland.
63
China has also used its role in UN-based institutions to block
peacekeeping forces. China successfully contributed to blocking
the deployment of African peacekeepers in Burundi during the
deteriorating human rights situation in 2015 and 2016. Beijing
supported the Burundian government’s rejection of AU plans
to deploy five thousand East African Standby Force (EASF)
peacekeepers to protect civilians, a deployment that would have
had to receive UN Security Council approval due to Burundian
president Nkurunziza’s objection to the deployment. China,
together with Russia, signaled that the two nations would
CHINA USED ITS ROLE IN UN-
BASED INSTITUTIONS TO BLOCK
THE DEPLOYMENT OF AFRICAN
PEACEKEEPERS IN BURUNDI
DURING THE DETERIORATING
HUMAN RIGHTS SITUATION IN 2015
AND 2016.
block any resolution infringing upon Burundi’s sovereignty. To
avert criticism, China donated US$200,000 to the East African
Community (EAC) comprising Kenya, Tanzania, Uganda,
Rwanda, Burundi, and South Sudan as part of efforts to facilitate
a Tanzania-led dialogue to resolve the crisis in Burundi.
64
China’s development policy in East Africa has focused on
demonstrating that Beijing respects regional demands for
infrastructure development and for embedding political and
security initiatives in regional institutional legitimacy. China has
plugged into regional infrastructure and investment vacuums at
a time when other powers showed little interest in East African
development needs, nurturing an image as a responsible
power which contributes to regional economic, institutional,
and political self-reliance. This has allowed China to translate
economic power into political, security, and military-strategic
influence relatively undisturbed by local and global criticism
despite Chinese contributions to growing geopolitical rivalry,
human rights violations, and local indebtedness.
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THE ARCTIC: TESTING THE WATERS
Initially, China’s presence in the Arctic reflected scientific
interests. As a signatory state to the Spitsbergen Treaty, which
recognizes Norwegian sovereignty over Svalbard, China
established a research station in Norway’s far north in 2004
alongside a diverse group of countries that includes Poland,
India, and Italy. Led by the Polar Research Institute of China
in Shanghai, which was established in 1989, China’s Arctic
Yellow River Station conducted research into the northern
lights, the ice pack, glacier monitoring, and atmospheric
conditions.
65
Environmental and climatic changes in the
Arctic affect China. For example, the Arctic sea ice melt
influences the waves of the jet stream flowing west to east
over the Northern Hemisphere, increasing smog levels in
Beijing. Similarly, the Arctic sea ice melt is connected to the
ice melt of the Tibetan plateau, which contains the world’s
third-largest store of ice, giving rise to floods and mudflows in
neighboring countries.
66
Photo Caption: People wave goodbye to Xuelong 2 during a departure
ceremony at Shekou Port on October 15, 2019 in Shenzhen, China.
Xuelong 2, or Snow Dragon 2, is China's first home-built polar ice
breaker. (Chen Wen/China News Service/VCG via Getty Images)
In the 1990s and 2000s, China emphasized its climatic scientific
interests in the Arctic. It joined regional institutions that would
allow it to collaborate with local partners on scientific research.
In 1996, China became a member of the International Arctic
Science Committee (IASC), a nongovernmental organization
that aims to facilitate multidisciplinary research on the Arctic and
its role in the earth system. In 2005, China was invited to join
the Ny-Ålesund Science Managers Committee, which facilitates
cooperation among research stations in Svalbard.
67
In the
2010s, China began to develop a wider palette of commercial
and security interests. As the sea ice melts, the prospects of
using the Northern Sea Route running along Russia’s Arctic
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CHINA HAS USED JOINT
VENTURES WITH WESTERN
SHIPBUILDING COMPANIES
TO TRANSFER DESIGN KNOW-
HOW, FACILITATING CHINA’S
ESTABLISHMENT OF A GLOBAL
CARGO FLEET THAT IS
SURPASSING WESTERN SHIPPING
DOMINANCE.
shore to transport cargo to Europe are raised. Using an ice-
free Northern Sea Route lowers the cost of insurance due to
the lack of piracy, while the reduced number of days used for
shipping the cargo from East to West contributes to cheaper
transport costs. China’s large shipbuilding and shipping industry
and its strategic partnership with Russia make this sea route
commercially interesting to China. China has used joint ventures
with Western shipbuilding companies to transfer design know-
how, facilitating China’s establishment of a global cargo fleet
that is surpassing Western dominance of the shipbuilding and
shipping industries. In 2018, 52 percent of new ships in China’s
cargo fleet was designed in China and 56 percent of new ships
were built domestically. Thirty-nine percent of new ships were
financed by China, and 29 percent of new ships were operated
by China.
68
As the sea ice melts, the Arctic sea routes become
commercially attractive for China’s maritime industry. The most
promising route by 2030 will be the Northern Sea Route, which
generally follows the Russian coast from the Bering Strait to the
coasts of Nordic states.
69
Access to Europe and North America
via the Arctic would reduce the distance between China and
these areas by roughly four thousand nautical miles.
70
China
has two polar icebreakers,
Xuelong 1
and
Xuelong 2,
allowing
China to conduct scientific research and assess the commercial
opportunities of the Arctic sea routes. The polar icebreakers
went into service in 1994 and 2018, respectively.
China also has commercial interests in Arctic energy and
minerals resources. China’s investments are usually co-financed
arrangements, reflecting the high level of technical expertise
required to extract energy and minerals resources in the Arctic
and the legitimacy China obtains from entering into partnerships
with states that are less likely to be seen as potential threats.
For example, CNPC has bought a 20 percent stake in the Yamal
Liquid Natural Gas plant, which forms part of Russia’s Arctic
Liquefied Natural Gas (LNG) production. Similarly, in 2016 the
Chinese company Shenghe Resources became the largest
shareholder in Greenland Minerals by buying 11 percent of the
shares in the company. Greenland Minerals is an Australian
company which has the concession for extracting rare earth
minerals in Kvanefjeld in Greenland. The company has yet to
obtain permission for extraction. China processes approximately
80 percent of global rare earth minerals, giving it a strategic
interest in the extraction license.
71
These investments have
been encouraged by local interests in Greenland and Russia,
keen to profit from unexplored resources and attract foreign
direct investments. However, the recipient countries cannot
control which shareholders foreign investors decide to partner
with. By partnering with other countries, China can enter the
Arctic commercially without asking regional governments.
In 2018, Chinese interests in the Arctic were coupled to its BRI
vision with the publication of its Polar Silk Road policy. The white
paper encourages Chinese companies to invest in building
regional infrastructure and in developing Arctic shipping lanes.
China describes itself as a near-Arctic state, indicating that China
is a key stakeholder with long-term interests in participating in
regional development.
72
China’s announcement that it was a
stakeholder in the Arctic has been met with growing concern
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from the region’s states, Denmark/Greenland/Faroe Islands,
the United States, Canada, Norway, Finland, Russia, Iceland,
and Sweden. All, except for Russia, are North Atlantic Treaty
Organization members or NATO affiliates. Despite chronic
infrastructure development needs for railways, ports, airports,
and roads, Chinese infrastructure investments have been limited.
For example, China has offered to pay for the Arctic Corridor
railway that would link Asia and Europe via rail from the port in
Norwegian Kirkenes through Finland, despite analyses showing
that the railway is unlikely to be commercially viable. Because
of political concerns and resistance in the indigenous Sami
community, Finland has stalled talks about railway construction.
Within the region, there is no great desire to accept China as a
stakeholder in strategic Arctic infrastructure due to geoeconomic
and geopolitical competition between China and NATO. In
particular, China’s tendency to translate economic power into
political leverage is watched with concern by regional states.
China’s demand that the Faroe Islands choose the Chinese
telecommunications giant Huawei for implementing 5G Internet
provided it wants to keep a favorable free-trade agreement in
place illustrates the potential problems in economic cooperation
with China.
73
However, these concerns are not aired in public to
avoid Chinese resentment.
74
China’s Arctic strategy came with a commitment to participate
actively in Arctic governance and international cooperation,
upholding the current Arctic governance system and regulating
and supervising the activities of Chinese citizens.
75
China
became an observer state in the Arctic Council in 2013, together
with India, Italy, Singapore, South Korea, and Japan. The Arctic
Council is the leading intergovernmental forum advancing
cooperation between Arctic states, indigenous communities,
and other inhabitants, particularly regarding environmental
and sustainability issues. Chinese institutional engagement
has been key for Beijing to align with other powers to try to
avoid being accused of advancing geostrategic interests at the
expense of regional interests. Together with the other twelve
observer states, China is working to expand the influence in the
Arctic Council on the grounds that environmental and climate
issues are a global rather than a regional concern.
In the Arctic, China prioritizes its interests in scientific
research rather than fisheries, since no commercial fishing
takes place in the ice-covered high seas of the Arctic Ocean.
However, anticipating that in the future fish stocks could
become commercially interesting, in 2018 the Arctic states
and the near-Arctic observer states of the Arctic Council,
China, Japan, South Korea, and the European Union (EU)
signed the Agreement to Prevent Unregulated High Seas
Fisheries in the Central Arctic Ocean (the CAO Agreement).
The agreement puts a temporary ban on commercial fishing
for sixteen years. The parties to the agreement cannot be
prevented from or restricted in conducting marine scientific
research. China’s engagement has made it a key player in
future rules on fisheries in the Arctic, allowing it to sit at the
table when a prospective regional fisheries management
organization is established.
76
In private, Chinese scientists
have already revealed that China does not intend to respect
the moratorium on fisheries insofar as it becomes attractive
to fish in the Arctic high seas.
77
China’s history of not keeping
agreements it has signed, or of trying to revise how existing
rules are interpreted, give rise to concern regarding China’s
future role in resource extraction.
China’s navigation policy in the Arctic may influence its attempt
to revise the United Nations Law of the Sea Convention
BY PARTNERING WITH OTHER
COUNTRIES, CHINA CAN ENTER
THE ARCTIC COMMERCIALLY
WITHOUT ASKING REGIONAL
GOVERNMENTS.
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(UNCLOS). China has been particularly active in demanding that
military vessels and aircraft notify of their passage through two
hundred nautical exclusive economic zones in the South China
Sea, which China claims as its historic sea in contrast to most
states that consider the sea international waters. In the Arctic,
Canada considers the Northwest Passage to be its territorial
waters, and Russia claims rights to administer the Northern Sea
Route as an ice-covered area. So far, China has decided to
notify Canada and Russia when it sails through these waters,
thus implicitly recognizing them as territorial seas.
78
To counter
this practice, France has begun sailing through the Northern
Sea Route to manifest the area’s status as international waters.
Although potential future shipping interests might encourage
China to consider the Arctic Sea routes international waters,
the nation’s efforts to change the interpretation of the law of
the sea have higher priority because these rules have global
implications and because the commercial value of the Arctic
sea routes remain questionable.
CHINA’S ARCTIC RESEARCH
STATIONS ARE LAUNCHED AS
FACILITIES FOR CONDUCTING
RESEARCH ON NORTHERN
LIGHTS, GLACIOLOGY, CLIMATE
CHANGE, SATELLITE REMOTE
SENSING, FISHERIES, AND
OCEANOGRAPHY. HOWEVER, THEY
CAN ALSO BE USED FOR MILITARY
PURPOSES OF SURVEILLANCE,
In contrast to Central Asia, China and Russia appear to
keep each other at arm’s length on geopolitical issues in
the Arctic. Russia’s Yamal LNG project involves several
international investors to avoid dependency on one investor
country. Although Russia welcomes Chinese investments, it is
concerned to keep Chinese engagement in Russia’s Arctic at
modest levels. Similarly, China appears to avoid being coupled
to Russia’s geopolitical agenda to increase Russian influence
in its Arctic neighborhood. For example, China’s proposal for
constructing an Arctic Corridor railway initially went through
Russian Murmansk. However, to avoid violating Western
sanctions against Russia the proposal was redrawn to exclude
the Russian Arctic region. The behavior points to China’s desire
to avoid becoming entangled in geopolitical conflicts to the
detriment of Chinese interests.
China is not a military power in the Arctic and shows no
immediate interest in becoming one. The Arctic is not likely
to play a role as China’s nuclear deterrent, since China is
developing long-range submarine-launched ballistic missiles,
enabling it to strike the United States.
79
However, Chinese
engagement in research stations are widely considered to
be for dual-use purposes. Apart from the research station in
Svalbard, China also has the 2016 Kiruna North Polar Ground
Station, which is a satellite receiving station in northern Sweden.
In 2018, the China-Iceland Arctic Science Observatory opened
in northern Iceland.
80
The research stations are launched as
facilities for conducting research on northern lights, glaciology,
climate change, satellite remote sensing, fisheries, and
oceanography. However, they can also be used for military
purposes of surveillance, communication, and interference in
space. The science-based presence allows China a foothold
with geostrategic implications. China is a leading space nation
COMMUNICATION, AND
INTERFERENCE IN SPACE.
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and its Arctic presence helps it advance its space capabilities.
China can use the research stations it has access to for future
military engagement in the Arctic, should Beijing decide that it
becomes desirable.
China’s development policy in the Arctic has plugged into
regional needs for funding for climate and environmental
research. China’s focus on these issues and its efforts to
become an active participant in Arctic multilateral institutions
have allowed the nation to become an Arctic player with
legitimate regional interests. China’s launch of its polar silk road
has allowed it to engage in resource extraction and introduce
proposals for building soft and hard infrastructure, at times by
translating economic power into political influence to facilitate
Arctic states’ embrace of BRI. Moreover, seemingly benevolent
policies such as notifying passage through the new Arctic sea
routes and opening research stations are used to strengthen
China’s geostrategic position in the world.
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CONCLUSION
China’s development policies pose numerous challenges for
regions, irrespective of their level of development and their
geographic proximity to China. This report has looked at
Central Asia, which consists of developing countries in China’s
continental backyard; Southeast Asia, which is home to a
mixture of highly developed, medium-income and low-income
countries in China’s maritime neighborhood; East Africa’s
fast-growing developing economies far from China’s shores;
and the Arctic region, with developed economies in a region
far from East Asia where China is a newcomer. Despite the
different economic makeup and geographic location of these
regions, the challenges China’s regional presence creates are
fundamentally the same.
First, China’s starting point is to look at how it can advance its
own interests by plugging into neglected regional development
needs which its BRI is able to address. China also seeks to
Photo Caption: Chinese Lunar New Year celebrations in Binondo,
Manila. (Alejandro Ernesto/NurPhoto via Getty Images)
obtain approval from key actors for its regional policies. In
Central Asia, China has invested heavily in regional infrastructure
such as transportation and energy while demonstrating self-
restraint toward the dominant regional power, Russia. These
measures allow Beijing to ameliorate widespread skepticism
about China’s willingness to promote Central Asian interests. In
Southeast Asia, Chinese investments in regional infrastructure
have been combined with a willingness to incorporate regional
demands such as environmentally sustainable projects and
favorable pricing to demonstrate that Beijing accommodates
regional interests. In East Africa, Chinese infrastructure
investments have been coupled with accommodating the calls
of local elites for political assistance to help them stay in power.
In the Arctic, China has plugged into the need for scientific
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ONE OF THE BIGGEST PROBLEMS
OF WESTERN GOVERNMENTS IS
STOVE-PIPE THINKING, WHICH
PREVENTS COORDINATION
OF SECURITY AND MILITARY-
STRATEGIC ISSUES WITH
ECONOMIC OVERSEAS
DEVELOPMENT ASSISTANCE.
research to manage environmental and climate challenges as
part of its infrastructure development projects, while maintaining
a low military-strategic profile to downplay local concerns about
Chinese contributions to rising regional geopolitical tensions.
Second, China is using regional institutions founded in the UN
system to obtain legitimacy for its development approach at
regional and global levels, prioritizing the regional level in the
event of disagreement between the region and the global UN
system. In Central Asia, China has initiated the SCO, using it
as an instrument to forge Russian-Chinese agreement on how
to meet regional challenges such as terrorism, and ethnic and
popular discontent. The SCO has been used to coordinate
regional responses to these challenges. In Southeast Asia,
China has demonstrated concern for the region’s insistence
that ASEAN plays a key role in fostering economic development
and security, signing on to the key treaties of the institution and
negotiating difficult conflictual issues such as a code of conduct
for the South China Sea at ASEAN level. In East Africa, China has
cooperated with regional institutions such as IGAD and the EAC
to accommodate East African demands for ensuring that local
elites have a greater say in managing regional security issues,
while also working with the UN to advance regional peace and
stability insofar as East African elites have been in favor of UN
involvement. In the Arctic, China has played a proactive role
in the Arctic Council and other regional institutions focusing
on environmental, climatic, and indigenous people’s concerns
to demonstrate its willingness to prioritize issues that change
global and local living conditions for the better.
Third, China’s regional development policies encompass a
comprehensive set of economic, political, security, and military-
strategic interests with global implications for China’s relative
power. Controversial interests are introduced slowly over decades
and under the radar to minimize pushback against China’s
regional presence. In Central Asia, China’s insistence on region-
wide counterterrorist measures against Muslim minorities that live
in China has allowed China to operate in Central Asian territory
to crack down on Uyghurs, Kazakhs, and other ethnic minorities
with links to China’s northwestern province Xinjiang. In Southeast
Asia, China advances its physical presence in the South China
Sea and prevents an internationalization of the Rohingya ethnic
CHINA’S INSISTENCE ON REGION-
WIDE COUNTERTERRORIST
MEASURES AGAINST MUSLIM
MINORITIES HAS ALLOWED
CHINA TO CRACK DOWN ON
UYGHURS, KAZAKHS, AND OTHER
ETHNIC MINORITIES WITH LINKS
TO CHINA’S NORTHWESTERN
PROVINCE XINJIANG.
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BEIJING’S APPROACH TO AID
ENABLES POLICIES THAT DO NOT
HAVE REGIONAL APPROVAL, SUCH
AS USING HUAWEI TO IMPLEMENT
5G INTERNET IN RETURN FOR
exercise of political influence behind the scenes for policies
that do not have regional approval, such as using Huawei to
implement 5G Internet in return for favorable trade deals,
allowing Chinese security forces to crack down on Muslim
minorities in other countries, using research stations for military
purposes, pursuing revisions to the law of the sea that restricts
the movement of military vessels and aircraft, and engaging in
infrastructure investments that fund the civil wars of local elites.
Greater inter-regional coordination through the UN system and
FAVORABLE TRADE DEALS.
conflict in Myanmar by playing on intra-ASEAN differences.
China’s divide-and-rule approach allows it to pursue land
reclamation, militarization, and restrictions on innocent passage
for military vessels and aircraft in the South China Sea and to
support Myanmar’s crackdown on Muslim minorities without
much regional pushback. In East Africa, Chinese peacekeeping
contributions hide the fact that its oil investments contribute to
financing the ongoing civil war in South Sudan. Similarly, Chinese
antipiracy contributions are a thinly veiled excuse for pursuing a
military-strategic presence allowing the Chinese military access
to the Indian Ocean and the Middle East. In the Arctic, Chinese
passages through the Northern Sea Route and the Northwest
Passage support its global efforts to change the law of the sea,
and its financing of research stations contributes to its military-
strategic surveillance and space capabilities.
The findings of this report point to the need to assess the
global implications of China’s regional development policies.
China targets local development needs with plenty of financial
resources and through institutions with regional and global
legitimacy. This approach enables China to address such needs
where local elites and other global development providers
have demonstrated neglect, either because the funding is
not available or due to insufficient willingness of local elites
to address the development needs of their people. However,
the cost of this seemingly benevolent approach is Beijing’s
by allowing external parties a greater role in regional institutions
is likely to help concerted pushback against the problematic
aspects of China’s regional presence. More multilateralism,
not less, is the answer to China’s efforts to change the rules
and mechanisms of regional institutions from within. Moreover,
including private-sector capital from non-Chinese countries in
regional institutional efforts to identify infrastructure investments
that meet regional rather than national needs and are likely to
be profitable will help provide competition to China’s growing
role as a development assistance provider. In addition, greater
cooperation between external sources of investment and regional
institutions in identifying fundamental development needs that
can persuade local elites to refrain from accepting cooperation
with China on encroachments on fundamental democratic and
human rights in return for meeting these needs can help push
back at the authoritarian and undemocratic elements of Chinese
influence. For example, education for children and young people
is fundamental to the development needs of populations in all
these regions. However, these social goods must be provided
in ways that refrain from alienating local elites by questioning
local values and belief systems. For example, focusing on
business school education to provide regional populations
with instruments for becoming more self-reliant in providing for
economic development is a good instrument to benefit local
economies without engaging in political provocations.
Another issue raised by China’s approach to development is the
focus on the least developed economies found among some
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Western development assistance providers. This analysis finds
that developed and developing economies share the problem
of chronic infrastructure development needs with little or no
funding available. Highly developed Western societies have
peripheries with sustained shortages of funding for solving
infrastructure and climate challenges. These funding issues
should be addressed at the regional level because many of
them cannot be solved nationally, and these discussions
would benefit from including private-sector interests. For
example, local shipping companies might be willing to invest
in infrastructure projects in the Arctic or provide funding
for environmental projects as part of their corporate social
responsibility policies. The newly created Arctic Economic
Council might aspire to be a model for a regional approach to
private-sector involvement in other regions.
Finally, one of the biggest problems of Western development
and security agencies is stove-pipe thinking, which prevents
coordination of security and military-strategic issues with
economic overseas development assistance. The establishment
MORE MULTILATERALISM, NOT
LESS, IS THE ANSWER TO CHINA’S
EFFORTS TO CHANGE THE RULES
AND MECHANISMS OF REGIONAL
INSTITUTIONS FROM WITHIN.
of separate governmental agencies tasked to assess and
suggest how to prioritize potentially conflicting development
and security concerns appears to be necessary to prevent
dysfunctional regional policies. The work of such agencies
would encompass security screenings of development policies
and development screenings of security policies to ensure
that policies are effectively aligned with national priorities and
concerns in recipient and provider states. Such efforts are
essential in a world where security and economic dynamics are
closely entwined.
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ENDNOTES
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