Transport at centre of China’s drive for regional supremacy

September 24, 2014 by Brendan O'Reilly

China is attempting to reclaim its historic position as the centre of balance in Asian and world affairs, not least through its efforts to strengthen economic ties and build improved transport links with its neighbours. However, ethnic rivalries and alternative routes can still challenge China’s Eurasian pre-eminence.

Beijing’s intensified outreach to its neighbours was outlined by vice foreign minister Liu Zhenmin at the end of last year when he noted that  the total trade volume between China and the East Asian and South Asian countries from January to September 2013 “exceeded $834.3bn, which took up 27.3% of China’s total foreign trade volume during the same period.” He added that about 70% of China’s foreign investment goes to the Asian countries and regions.

Yan Xuetong, dean of Tsinghua University’s Institute of Modern International Relations further explained this strategy in a recent interview with The Asahi Shimbun: “China will be able to guarantee, by entering alliances with smaller countries in its neighbourhood, that it will not present a security threat to them. Without alliances, it would be natural for neighbouring nations to feel frightened. It doesn’t matter if they wish to be allied with us. It’s about whether China wants to be allied with them. No country would be averse to being patronized as long as China is putting up money. The United States was the foremost priority in China’s foreign policy in the past, but the emphasis will shift to neighbouring countries in the future.”

Beijing’s increased focus on developing relations with its neighbours is evidenced by many recent developments. China Outlook has already covered Beijing’s ongoing outreach in Central Asia. This effort is part of Beijing’s much-heralded New Silk Road Project, which seeks to strengthen overland transportation routes between East Asia, Central Asia and on to Europe.

Concurrent with the push for expanding transport routes to the West is a major move to solidify overland connections with Southeast Asia. In August the Thai government approved a Chinese plan to use high-speed rail lines to link Thailand and Laos with southwest China by 2021. This project also seeks to extend the line down through peninsular Malaysia to Singapore. According to Yi Peng, of the Beijing-based think tank Pangoa, the route could be branched out even further: “The railway line has great potential considering its future extension to Singapore, Myanmar, and Vietnam.” China already has about half the world’s high-speed rail track, with another 11,000 miles presently under construction.

Beijing is also reaching out to regional rival India for joint development of high-speed rail projects. Chinese companies are already poised to bid jointly on five major rail projects.

As Vinayak Deshpande, a managing director with India’s Tata Projects, explained to the Hindustan Times: “We like to use China’s technology and products because they are proven to be reliable and the cost is relatively low. When the new prime minister, Narendra Modi said India will make great efforts on railway construction and urban infrastructure, it brings big opportunities for Chinese companies”. China is also building a second rail line into Tibet, which could be linked with the Indian border if the political will existed in both countries.

It appears that Beijing is positioning itself as the indispensible Eurasian transportation hub. There are several factors driving this strategy – the most important of which is simple economics. China does more trade than any other country on earth. China and the Association of Southeast Asian Nations (ASEAN) are already joined in the most populous free-trade area in the world. China is India’s largest trading partner, and China is only narrowly edged out by the US as the largest trade partner of the EU.

Paul Lacourbe, an associate professor of operations management at the Central European University Business School in Budapest, explained the economic benefits of overland trade to China Outlook: “There is a sweet spot in transportation – airfreight – which is fast, but it is too expensive and the quantity is too small; sea transport is cheap but it takes too long, so there are products that are most suitable to be transported by land. The cost of transportation by land is going down day by day, so this means this mode of transportation is becoming more and more competitive.”

Along with simple economic motives is the issue of geopolitical strategy. Beijing is strategically constricted in the West Pacific by Japan and the American regional military presence. Expanding overland trade routes could help ease this geopolitical pressure, as well as solidifying economic and political ties with neighbouring countries. Professor LaCourbe also outlined Beijing’s strategic motives for seeking land-based trade routes: “The most important reason remains the vulnerability at sea faced by China. If you look at the situation right now, China is so dependent on raw materials and energy imports, and also exporting its products, so this means the whole Chinese economic system is dependent on the goodwill of the American navy. I don’t think this is a position that the Chinese leaders want to be in.”

Finally, there is the issue of competition. There is already an alternative overland route in Eurasia from the Pacific coast to Europe – the Trans-Siberian railway that runs through Russia. A potential route from Southeast Asia, through India and Pakistan and up into Central Asia is another possible competitor to Beijing’s favoured China-Kazakhstan-Caspian-Europe line.

Professor S Fredrick Starr, chairman of the Central Asia-Caucasus Institute and Silk Road Studies Program, outlined the potential rivals of the China-centric “New Silk Road”: “Think of the entire Eurasian landmass as being crossed by three corridors. There is a northern corridor, which is the youngest – it was created in the 1890s by Tsarist Russia when it built the Trans-Siberian railroad. That is functioning today; it is not, however, booming, and the new middle corridor, which is what China has opened up across Kazakhstan and other routes in central Asia, this is the rising corridor, the one that would correctly be called the New Silk Road.

“Then there is the southern corridor, about which nothing is being said these days, but the southern corridor is the one that connected India to Europe, and which goes all the way from Hanoi to Hamburg. If you look ahead, India and Pakistan together are going to have a much, much larger population than China, a younger population, a larger working age population. Any reasonable projection in the future would have to say India is going to become a major manufacturing centre – and it will be thinking the same kind of alternative land corridor to Europe that China is.”

Beijing’s efforts to build a China-centred Asian order via strengthened trade and transport links could run into significant problems, even in the hypothetical absence of viable competitive routes. Geopolitical tensions between major powers are a potentially disruptive factor – recent economic sanctions between the EU and Russia are an example of how geopolitics can sometimes trump mutually beneficial trade.

Both experts expressed concerns about potential Sino-Russian rivalry to China Outlook. According to Professor Lacourbe: “I think the most important difficulty is with Russia. This New Silk Road effort by China is very much dependent on the good will of Russia. The Russians could change their opinion rather quickly.”

Meanwhile, Professor Starr expressed similar worries about Chinese outreach into Russia’s historical sphere of influence: “I think the best way to understand China’s programme is as an effort to create a single China-based transport system that serves China’s needs, that covers the entirety of Central South, and East Asia. It will make China the dominant economic figure where it is not today. This invites conflict with Russia, because China’s economic presence is growing and growing rapidly whereas Russia’s isn’t. The Russia factor is very serious; they make a show of friendship – but there are different interests at play.”

Besides great power rivalries, there is also the issue of non-state, ethno-religious insurgencies. Any potential rail route through southern Thailand could be vulnerable to ethnic Malay insurgents. There are widespread fears of militancy spilling out of an unstable Afghanistan into Central Asia. China also currently faces significant instability in Xinjiang.

As China expands its economic footprint throughout Asia, some experts foresee a potential local blowback. Ethnic Chinese tend to dominate many industries in Southeast Asia. There is a history of anti-Chinese riots throughout the region, most recently erupting in 1998 in Indonesia and in May this year in Vietnam .

Professor Starr worries that ethnic tensions in Southeast Asia and China’s Xinjiang could eventually develop along China’s new trade corridors: “Wherever China has opened up rail routes, emigration has followed and businesspeople, entrepreneurs have followed. One of the potential questions is to what extent it would create a perceived demographic threat to its neighbours, especially in Central Asia. This is rather a taboo subject, but there are people across Central Asia who worry that they could become like South East Asia in the late 19th and early 20th century.”

Beijing’s quest to position China at the centre of a Eurasian economic order faces many challenges. In a globalized world, geopolitical rivalries and ethnic loyalties can still disrupt the best-laid plans. The Chinese government will need to consider local sentiments and great power rivalries as it seeks deeper integration with its neighbours, or it could become a victim of its own success.

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