The power of China’s checkbook

POLITICAL FUTURES By Ian Bremmer

There are many ways a government can assert its interests on the international stage. Some use military muscle. Others use subversion or bluster. In Asia, Africa, Latin America, and even in Europe, China is using investment to get what it wants from countries and governments in need.

The most obvious examples are in Asia. Pakistan’s relations with the United States have deteriorated sharply in recent years, for many reasons, and President Donald Trump’s warmer ties with Indian Prime Minister Narendra Modi have given Pakistan’s government and military good reason to invest more deeply in strong relations with China. In turn, Beijing’s investment in Pakistan has gathered momentum. An infrastructure development project, the $55 billion China-Pakistan Economic Corridor, part of China’s broader “Belt Road Initiative,” is generating growth and creating much-needed jobs in Pakistan. In return, China is developing the Port of Gwadar, which will provide China a stronger presence in the Indian Ocean.

Philippine President Rodrigo Duterte doesn’t like criticism from the US and Europe, and Beijing has pledged to help him improve his country’s underdeveloped infrastructure. So far, China hasn’t delivered much, but the promise alone has persuaded the Philippine president not to push hard against China’s expansive claims in the South China Sea. He has also added the Philippines’ voice to a more pro-China stance from ASEAN, the 10-member Association of Southeast Asian Nations. Malaysian Prime Minister Najib Razak has also added to ASEAN’s tilt toward China and likewise backed off rival claims in the South China Sea, because his country also needs investment in roads, bridges, and especially rail lines — and because the scandal involving misappropriation of funds from 1MDB, a sovereign wealth fund, leaves Najib and his government short of cash.

China’s deep pockets have long bought influence in Africa, where President Xi Jinping has pledged billions more in investment in coming years. China is also amplifying its voice across Africa via StarTimes, a state-backed, though privately owned, Chinese media and telecoms firm that beams Chinese content — and a Chinese worldview — via subsidiaries in 30 African countries into African households.

As a member of the BRICS group since 2010, South Africa has given China a gateway into the Southern African Development Community, which provides access to natural resources that support China’s growth and boost its political influence across the region. China is South Africa’s largest trade partner, and the two countries signed commercial deals in 2015 worth $6.5 billion. South Africa’s government has rewarded China’s willingness to invest by denying Tibet’s Dalai Lama, who is persona non grata in China, entry into South Africa on three separate occasions since 2009, though South African officials deny this.

Kenya’s President Uhuru Kenyatta was one of just two African leaders offered a seat at the Belt Road Forum in Beijing earlier this year, and Kenya can expect to be a major recipient of Chinese infrastructure investment as part of the maritime route of the Belt Road project. China has already built a high-speed rail connection between the Kenyan cities of Nairobi and Mombasa, and Kenya’s government has expressed thanks with support for China’s territorial claims in the South China Sea and for Beijing’s bid to persuade the International Monetary Fund to add China’s currency to its Special Drawing Rights Basket.

China has also spent considerable time and money building its influence in Latin America. China has become the largest export market for Brazil, Chile, Cuba, Peru, and Uruguay. But this is no longer simply a story of China buying commodities. These same countries plus Bolivia now import more from China than from anywhere else. Panama has also become part of the story, in part because China’s investment in expansion of the Panama Canal has allowed Chinese mega-freighters to reach the Atlantic and eastern seaboard of the United States. Earlier this year, Panama announced it would no longer recognize Taiwan, providing China another diplomatic victory.

Beijing has even extended this strategy into Europe, where leaders still act as though the world is hoping to follow their lead. The most-recent Chinese investment is in cash-strapped Greece, a country fed up with imposed austerity and bitter criticism from the EU. Greece has won Chinese investment through the Belt Road project. In particular, a Chinese state-owned firm now operates the Greek commercial port at Piraeus, the busiest in the Mediterranean. Earlier this year, Greece blocked an EU statement to the UN human rights council that criticized Xi Jinping’s crackdown on domestic political dissent and joined Hungary to support China’s South China Sea territorial claims at The Hague.

“While the Europeans are acting towards Greece like medieval leeches, the Chinese keep bringing money,” said a senior Greek official last month. There’s a lesson here for the United States, the European Union, and any other international player that would condition badly needed investment on domestic political behavior. Trump boasts of American power, but he’s made clear he has no interest in writing large checks. Now look at China from the recipient’s point of view. China offers good deals for governments and countries that need them — and it doesn’t demand risk and sacrifice in return.

The only question about this strategy’s future is where it will succeed next.

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Ian Bremmer is the president of Eurasia Group and author of Superpower: Three Choices for America’s Role in the World.

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