China’s Use of Economic Dependence to Rise to Global Power

The U.S., once the beacon of leadership in the world, has found itself at an interesting cross-section between maintaining its mantle and giving into populist tendencies that all but beg it to abandon its commitments. The resulting power vacuum, in the midst of Cold War II no less, has given our adversaries the ability to assume a growing amount of that responsibility mostly through economic investments. According to the China Global Investment Tracker from 2006–2017 China invested roughly $299 billion in Europe, $223 billion in North America, $120 billion in East and Southeast Asia, $98 billion in South America, $91 billion in Australia, $85 billion in West Asia (South Asia, Central Asia, and Russia), $77 billion in Sub-Saharan Africa, and $31 billion in the Middle East and North Africa.

While direct foreign investment is not an issue in and of itself, unfair economic deals may provide near-term benefits but also carry costs to host country sovereignty:

• In 2009, China used economic incentives, including a currency swap agreement to stabilize Argentina’s currency, to negotiate a 50-year, rent-free lease of nearly 500 acres for a satellite tracking facility in Argentina.
• In 2011, China reportedly agreed to forgive an undeclared amount of Tajikistan’s debt and received over 1,000 square kilometers of disputed territory in exchange.
• China has also assumed control over infrastructure as a form of compensation when projects have failed. For example, China financed a roughly $2 billion deal between Sri Lanka and a Chinese state-owned enterprise to develop Hambantota Port. In 2017, following the commercial failure of the port, Sri Lanka signed a 99-year lease for the operation of the port to the Chinese state-owned enterprise.
• China currently has claims to nearly 90 percent of Ecuador’s oil reserves through commodities-backed loans.
• In his December 13, 2018 speech announcing the Administration’s new Africa Strategy, U.S. National Security Advisor Bolton noted Zambia currently owes China $6 to $10 billion, and China is poised to take over Zambia’s national power and utility company to collect on Zambia’s financial obligations.
• In January 2018, China announced the formation of two courts based in China to adjudicate disputes regarding OBOR projects. There is debate whether the courts will operate in accordance with international rules and standards or adhere to Chinese laws and practices.
• In March 2018, China established the International Development Cooperation Agency to coordinate international aid, integrating responsibilities previously undertaken by the Ministries of Commerce and Foreign Affairs, to better align foreign aid with China’s diplomatic strategy, including OBOR.

These implications affect more than the host country. China’s efforts to enhance its presence abroad could enable their military to project power at greater distances from the Chinese mainland; in much the same way the U.S. has the ability to project power in Australia, Korea, Japan, and the entire Western Hemisphere. Between 2008 and 2017, China has increased its naval port of call access dramatically; outlined in the image below.

This global power projection becomes an issue for the U.S. when we consider that China characterizes its military strategy as one of “active defense,” a concept it describes as strategically defensive but operationally offensive. The strategy is rooted in the concept that once Beijing has determined that an adversary has damaged or intends to damage China’s interests at the strategic level, Beijing will be justified in responding “defensively” at the operational or tactical level, even if the adversary has not yet conducted offensive military operations. Essentially: “Mess with our contested islands in the South China Sea and we might be “strategically defensive” in Venezuela.”

It’s not unreasonable to expect China to be pushing so hard to advance their economic, cultural, and technologies. With historic injustices (both perceived and actual) ranging from the Opium Wars to the War of Resistance Against Japan, China set itself to modernize its capabilities in 1978 through four major projects: Industry, Science, Agriculture, and Defense. These modernizations were not without their failures (the Sino-Vietnamese debacle in 1979) and abuses (the 1989 suppression in Tiananmen Square), but on the whole the Chinese military has been able to learn from the nearly perpetual warfare status of the U.S. Military. To accelerate the PLA’s modernization and address capability shortfalls, Beijing increased the PLA’s budget by an average of 10 percent per year from 2000 to 2016. Beijing also established a PLA General Armaments Department in 1998 to rationalize equipment modernization and acquisition processes, and instituted several broad scientific and technical programs to improve the defense-industrial base and decrease the PLA’s dependence on foreign weapon acquisitions. The PLA also revamped its training programs, with all services attempting to prepare more realistically for conflict by emphasizing mission-focused exercises, multiservice operations, mobility, better Command and Control and staff work, and enhanced logistic support, as well as achieving battlefield advantage by applying “informatized” warfare.

Some recent advancements in Chinese leadership have been in the cyber domain as President Xi has promoted the “21st Century Digital Silk Road” alongside OBOR. Although China’s government has revealed few details, President Xi has stated the initiative should involve cooperation and development in “frontier areas” including digital economy, artificial intelligence, nanotechnology, and quantum computing, as well as areas such as big data, cloud computing, and “smart cities.” Similar to the potential abuses within OBOR, as China promotes the initiative it may also seek to protect its firms from global competition, as when China declined to grant regulatory approval for U.S.-based Qualcomm to acquire Dutch counterpart NXP after all eight other relevant jurisdictions approved.

Further exacerbating the concerns with the “21st Century Digital Silk Road,” The PLA often uses the term “informatization” to describe the transformation process of becoming a modern military that can operate in the digital age. The concept figures prominently in PLA writings and is roughly analogous to the U.S. military’s concept of net-centric capability: a force’s ability to use advanced information technology and communications systems to gain operational advantage over an adversary. In 2015, China’s leaders adjusted guidance on the type of war the PLA should be prepared to fight by directing the PLA to be capable of fighting and winning “informatized local wars,” with an emphasis on “maritime military struggle.” Chinese military strategy documents also emphasize the growing importance of offensive air operations, long-distance mobility operations, and space and cyber operations. In other words, China expects that its future wars mostly will be fought outside its borders and will involve conflict in the maritime and cyber domains.

Finally, foreign military sales have provided China with the capability to test its military technologies (usually against U.S. military technology) without actually engaging in direct conflict. Similar to Russian techniques in the Cold War, and modern day Syria, China’s primary method of maintaining military parity is through foreign military sales. These sales boast not only its military capabilities, but its economic and international standing, primarily through the use of often times misappropriated or stolen U.S. technology.