China’s foreign policy 2018: implementing the China Dream
In 2018, China’s foreign relations were dominated by the centralization of its foreign policy-making, designed to strengthen the hold of the Chinese Communist Party and the Chinese president himself on the decision-making system. The aim was to create a more efficient system that could better serve the interests of the country, eager to realize its national dream. At the same time, however, China appeared occupied in the exercise of its diplomacy of great power with Chinese characteristics, both at home – hosting three major global events – and internationally – playing a central role in the peace process that took place on the Korean peninsula. In this sphere China’s foreign policy witnessed a quite unexpected, but long awaited success; the North Korean leader’s repeated visits to the country that marked the end of years of speculation concerning the state of their brotherhood alliance and Beijing’s weak grip on its ally. Meanwhile, during the year under review, China had to manage very troubled relations with the US as a direct consequence of the trade war unleashed by the Trump administration, which went far beyond trade imbalances and commercial issues. Interestingly, the tense situation created by the US had some surprising effects: a definitive thawing of relations between China and Japan, one the one hand; and a strengthening of those between China-EU, on the other.
At the closing of the period under review, all the pieces of the puzzle appeared to be in the right place, and China was in a position to declare, without hesitation, that no-one could afford to dictate to the Chinese people what should or should not be done, as Xi Jinping opined at the conference celebrating the 40th anniversary of the reform and opening-up, on 18 December.
The present article focuses on China’s foreign policy which, in the year under review, was marked by a process of centralization, and culminating with the strengthening of the Chinese Communist Party (CCP) and the Chinese president himself on the decision-making system. The purpose was to forge a more efficient system that could better serve the interests of the country, eager to fulfil its national «dream» by 2049, on the occasion of the centenary of the People’s Republic of China (PRC).
This process was begun by Xi Jinping when he came to power and was confirmed by the 19th Party Congress (October 2017), and later by the annual session of the National People’s Congress (NPC), in March 2018. The key element of this process was the reform of the Chinese decision-making system, which included both the reorganization of institution building and the amendment of the former procedures of foreign policy decision-making.
In its new demeanour – which can be summarized in the new concept of «great power diplomacy with Chinese characteristics» (中国特色大国外 交) – China hosted three key global events, namely the annual conference of the Boao Forum for Asia, the 18th edition of the Shanghai Cooperation Organization (SCO), and the 7th Forum on China-Africa Cooperation (FOCAC). All three events demonstrated China’s growing assertiveness and confirmed its central role on the international scene, with special reference to Asia and Africa. At the same time China was able to play a central role in the Korean peninsula peace process which, ostensibly at least, took great leaps in the year under review.
Beyond Beijing’s strong diplomatic activism, two main facts dominated Chinese foreign relations in 2018, highlighting the highs and lows of the process of realizing the national «dream». The most surprising, and unexpected one, was the sudden rapprochement between Beijing and Pyongyang, symbolized by the North Korean leader’s frequent visits to China – three in less than three months – which marked the end of the never-ending speculation concerning the state of the brotherhood alliance between the two countries and Beijing’s weak grip on its ally.
The second event regarded the PRC’s troubled relations with the United States of America. Indeed, China was at the centre of a trade war unleashed by Donald Trump’s administration which went far beyond any commercial issues. On the one hand it contributed to the thawing in relations between China and Japan, while at the same time facilitated the revival of the trilateral negotiations for a Free Trade Agreement (FTA) between China, Japan and South Korea. On the other hand, it stimulated the strengthening of relations between China and the European Union (EU), as shown by the positive results of 20th EU-China Summit, resumed in its final Joint Statement, even despite the growing tensions around the Belt and Road Initiative (BRI) and its impact especially in Central and Eastern Europe (CEE) countries.
The article concludes with an update on the ubiquitous BRI, that in 2018 celebrated its 5th anniversary, amid continuing expansion and growing criticism. This could in the long term potentially derail China’s carefully laid plans, as clearly demonstrated by the attitude of India in the SCO.
2. Towards the centralization of foreign policy decision-making
Since coming to power Xi Jinping has asserted himself as a strong leader and has impressed a strong guide both domestically and internationally, inaugurating a new era of proactive foreign policy, mainly symbolized by the launch of significant international initiatives. At the same time, he has strived to represent China as a responsible «global citizen», committed to the defence of free trade, multilateralism, the environment, respect for the principle of legality, while guaranteeing the country’s «right to speak» (话语权), namely the power to dictate international rules and set the political agenda.
Little wonder that some observers interpreted his opening speech at the 19th Chinese Communist Party (CCP)’s Congress as confirmation of the end of the era of low profile, and the beginning of a new one characterized by greater self-confidence, increasing objectives and an unequivocal desire to occupy a global leadership position together with the United States and other major powers.
Such interpretation was corroborated by Xi Jinping’s 2017 New Year speech, broadcast simultaneously on CCTV and CGTN (the main overseas Chinese broadcaster), with English subtitles, when he declared that «as a great responsible country, China has something to say», and pledged without hesitation that his country «will be the keeper of the international order». Again in his speech at the conference celebrating the 40 years of «reform and opening-up» (改革开放) on 18 December 2018, Xi Jinping declared in a very straight forward way that «No one is in a position to dictate to the Chinese people what should or should not be done».
In order to sustain this new more visible and strong profile in foreign relations, the Chinese leadership undertook a process of centralizing foreign policy-making, giving Xi Jinping and the CCP greater control to «provide strong support for opening new horizons in China’s diplomacy» ( 为开创对外工作新局面提供坚强保障).
The process started with the establishment of an unprecedented National Security Commission (NSC), in April 2014, chaired by Xi, aimed at solving the coordination problems of both domestic and foreign policy decision-making. It continued with the concentration of power in the hands of the Chinese president who collected so many significant positions to merit the designation «chairman of everything», and later being hailed as the party «core» (核心) leader.
In 2018 the continuation of this process was reflected both in the changes of the foreign policy leadership team as defined at the 19th Party Congress and confirmed during the annual session of the NPC in March 2018, and in the upgrade of the Central Leading Small Group on Foreign Affairs (中央外事工作领导小组), headed by Xi, to Central Foreign Affairs Commission (外事委员会).
As analyzed in Francesca Congiu’s article in this same issue of Asia Maior, this concentration of power affected the party. The factions close to former leaders Hu Jintao and Jiang Zemin were largely marginalized, while the personnel appointments to top foreign policy-making positions were all closely linked with the Chinese president and his major concepts and initiatives. The new Politburo Standing Committee members Wang Huning and Wang Yang, and the new Politburo member Yang Jiechi, had been deputy leaders of the BRI leading group since 2014; Wang Huning, being one of the top political theorists, was also supposed to be behind the concept of the «China Dream».
As for the reshuffle of government and party institutions, it involved the upgrade of four Central Leading Small Groups (中央领导小组) – including the one for Foreign Affairs – to the rank of commissions (委员会), with the aim of strengthening the authority of the Communist Party and improving policy coordination across the departments. All the commissions were put under the chair of Xi Jinping, while the other members of the Politburo Standing Committee served as his deputy.
Of particular interest for the purpose of this article is the Central Foreign Affairs Commission’s replacement of the former Central Leading Small Group on Foreign Affairs as the central institution in charge of coordinating China’s foreign policy. It is useful to underline that the Central Leading Small Group on Foreign Affairs was set up in its present form at the beginning of the 1980s with the precise goal of coordinating China’s often disjointed foreign policy. That said, its general office, which was located inside the Ministry of Foreign Affairs, was reportedly often bypassed by other government agencies because it was seen as low-ranking and ineffective, and the group appeared to be incapable of coordinating China’s foreign policy. The same Ministry of Foreign Affairs has been troubled for a long time by its inability to behave coherently due to the presence of a «cacophony of voices», i.e. multiple actors striving to influence foreign policy.
The new Commission held its first meeting on 15 May 2018, shedding light on the top policy-making body for the future country’s diplomacy, as well as its direction. Xi Jinping was revealed as its head, Premier Li Keqiang its deputy head, while Vice President Wang Qishan (CCP’s former anti-corruption chief), Wang Huning, and Vice Premier Han Zheng were included in its membership.
In his opening speech Xi Jinping called for enhancement of the Party’s centralized and unified leadership on foreign affairs and pledged to continue promoting the BRI – which in the meantime had been included in the party constitution and identified with the «China Dream.» In particular, Xi called for a correct understanding and dealing with the changes of the current international situation, and to forge ahead in opening up new prospects of «major-country diplomacy with Chinese characteristics», so as to make a greater contribution to the realization of the two centenary goals and the Chinese dream of great national renewal.
In so doing the leadership was sending a clear message, namely that the party alone controlled China’s foreign affairs and that it would not tolerate policies or actions that might compromise China’s efforts to become a global power by 2049, the centenary of the PRC.
That said, a more coordinated foreign policy could prove to be a great advantage not only for Beijing, but also for its diplomatic counterparts, since it would help eliminate the conflicting messages resulting from the presence of a multitude of actors, reduce the instances of diplomatic misun- derstanding and thus assure a better comprehension of the Chinese system.
3. The «great power diplomacy with Chinese characteristics» at work
As already seen in Francesca Congiu’s essay in this same issue of Asia Maior, during the first session of the 13th NPC, «Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era» (习近平新时代中国 特色社会主义思想) was introduced into the PRC’s constitution. According to some Chinese experts in the foreign policy context, the «New Era» (新时 代) concept indicates a transition to a more active approach to diplomacy, while the emphasis on «Chinese characteristics» (中国特色) implies that the Chinese government would conduct its international affairs consistent with traditional Chinese cultural values, rather than align with Western models and principles. That was exactly what the new concept of «great power diplo- macy with Chinese characteristics» (中国特色大国外交) implied.
The events that best showcased China’s new diplomatic concept and China’s opening-up drive were the three key global events the country hosted during the year under review, namely the Boao Forum for Asia, the Shanghai Cooperation Organization, and the Forum on China-Africa Cooperation. Interestingly, they each presented new features as compared to previous editions.
3.1. The Boao Forum for Asia annual conference
The Boao Forum for Asia (BFA) annual conference, which took place in Boao, a town in the southern island province of Hainan, from 8 to 10 April, was the first since Xi Jinping was «unanimously re-elected» as Chinese president and the first since China’s commitment to building a «community with a shared future for humanity» (人类命运公同体) was written into the country’s constitution in March.
According to Chinese foreign minister Wang Yi, Xi’s attendance at the BFA annual conference at that historic moment – 2018 marked the 40th anniversary of «reform and opening-up» and the beginning of the implementation of the decisions taken at the 19th Party Congress – was of great significance in further promoting the «major-country diplomacy with Chinese characteristics in the new era», building «a community with a shared future» for Asia and humanity, and advancing the cause of peace and development.
Indeed, in his keynote speech delivered at the opening ceremony, Xi Jinping vowed non-stop effort in continuing the process of «reform and opening-up» and called for people around the world to work together to build a «community with a shared future for mankind» and make Asia and the world peaceful, prosperous and open, since China and the world could not develop without each other.
Beyond this rhetoric, Xi’s speech was focused on four main themes – improvement in the market environment; market access for foreign firms; investment opportunities for foreigners, and the creation of a strengthened intellectual property protection regime in China for the benefit of foreigners and the domestic economy. It was praised by both US experts and other Western observers. It is worth quoting the International Monetary Fund (IMF) managing director Cristine Lagarde’s comments: «Xi’s speech added certainty and hope to the world today, and the world needs leadership like China».
3.2. The 18th Shanghai Cooperation Organization summit
The 18th SCO summit, held between 9-10 June in East China’s coastal city of Qingdao, was the first following the crucial membership expansion to include India and Pakistan in June 2017; these were grounds enough to consider it a historical summit. Here the peculiar position of India must be highlighted, it being a member of the revived quadrilateral entente, or «Quad», which besides India, includes Australia, Japan, and the US.
For these reasons, since its formal inclusion in the SCO there has been an intense debate among observers mainly focused on doubts relating to India’s readiness to join the Organization while jointly safeguarding Western interests, as well as the kind of contribution New Delhi might make to it.
Unsurprisingly, India was the only member state that did not endorse the BRI programme, as revealed in the «Qingdao Declaration», which named all member states, except one, as «reiterating support for China’s BRI» project. In defense of his position, as when in 2017 New Delhi declined China’s invitation to join the first Belt and Road Forum in Beijing, Indian prime minister Narendra Modi spoke of the need to «respect sovereignty» in dealing with infrastructure projects. He was clearly signalling his government’s objection to a portion of the BRI, that is the China-Pakistan Economic Corridor (CPEC) – one of the six economic corridors under the Initiative – which passes through Pakistan-occupied Kashmir. Modi also specified that his country welcomed new connectivity projects «that are inclusive, sustainable, transparent, and those that respect the sovereignty and territorial integrity of nations», adding that «connectivity with SCO and neighbours is a priority for India». In other words Modi made clear that India could not accept a project that would ignore its core concern on sovereignty and territorial integrity – two main pillars of PRC’s foreign policy – and that would have the potential to greatly strengthen one of his country’s historical enemies.
That said, Beijing was reportedly successful in obtaining India’s participation in its effort to rally support for China in the trade dispute with the Trump administration, a matter of no secondary importance. Of even greater importance was the fact that India declined the invitation to be part of a US-led trilateral initiative (including also Japan and Australia), launched on 30 July to fund infrastructure projects in order to counter-balance the BRI in the Indo-Pacific region. A decision that, according to specialists, was consistent with the country’s emphasis on multipolarity in the Indo-Pacific region and non-bloc security architecture, but reflected at the same time Modi’s government efforts to stabilize India’s relations with the PRC. This was in line with the positive tone that characterized bilateral relations in the final phases of 2017. The two countries held a series of engagements during the year under review, starting with Indian prime minister’s informal summit with Xi Jinping in Wuhan on April 27-28. Another two meetings took place on the sidelines of major events, in addition to the SCO, such as the BRICS summit in Johannesburg in July, and the G-20 in Buenos Aires at the end of November. In particular, during their last encounter both leaders agreed that there had been a «perceptible improvement» in bilateral ties over the year.
3.3. The 7th Forum on China-Africa Cooperation
The 7th Forum on China-Africa Cooperation (FOCAC) opened in Beijing on 3 September at the Great Hall of the People with a keynote speech delivered by the Chinese president, entitled significantly «Work Together for Common Development and a Shared Future» (合作共赢携手构建更加紧 密的中非命运共同体). During the speech Xi announced that China would implement eight major initiatives with African countries in the following three years and beyond, covering fields such as industrial promotion, infrastructure connectivity, trade facilities, and green development, in an evident attempt to rebrand China’s policy in Africa, and definitively dispel the accu- sation of neocolonialism.
The state of relations and the different level of cooperation between the two parties were clearly shown in a promotional video produced by China Global Network Television (CGNT) from China Media Group and aired at the start of the opening ceremony. Despite the banality and rhetoric of the title – «A Shared Dream, A Shared Future» (同心筑梦命运与共) – the video was a compilation of the many activities that China pursues in Africa on different levels, and in many ways is emblematic of China’s definitive success on the continent. A symbolic aspect of that success is the fact that after Burkina Faso cut ties with Taiwan, at the end of May,  there remained only one country which failed to recognize the Republic of China (ROC), namely the Kingdom of Eswatini (formerly Swaziland).
In fact the former Swaziland was the only African country absent at the important summit in September.  Speaking at a news briefing, China’s special envoy for Africa, Xu Jinghu, said that the issue of Eswatini and its lack of ties to Beijing was «an important question», but it was up to them to take the initiative. «On this issue we won’t exert any pressure. We’ll wait for the time to be right», he said, adding that he was convinced that that day would come sooner or later.
Interestingly, the 7th FOCAC was preceded in June by an unprecedented China-Africa Defense and Security Forum, a two-week conference hosted by China’s Ministry of National Defense in Beijing. The Forum, which focused on the security situation in Africa and the goal of deepening military cooperation between China and African nations, was attended by military leaders from nearly 50 African countries, clearly reflecting the expanding influence of China’s military on the continent. Contrary to the vision of the majority of experts who considered China’s relations with African states to be mainly economically focused and far less interested in military matters, the Forum was a demonstration of China’s growing military ties with Africa,  symbolized by the inauguration of the country’s first over- seas «military base» in Djibouti in August 2017, and Beijing’s increasing contribution to UN peacekeeping missions.
4. China-North Korea: the long-awaited renewal of the brotherhood alliance
In 2018 Sino-North Korean relations underwent major changes, the most striking of which related to the North Korean leader’s repeated visits to China. These visits marked the end of years of speculation concerning the state of the brotherhood alliance between the two countries, and Beijing’s weak grip on its ally. The events that occurred on the Korean peninsula confirmed the centrality of China, and Beijing’s intention to assert its role, contradicting what Chinese officials had often reiterated in the last few years, namely that Beijing had very limited influence on the entire situation and that the US, not China, held the key to solving the North Korean nuclear issue. The meetings between the Chinese and North Korean leaders not only reinvigorated bilateral relations but underscored the necessity of respecting China’s interests and role vis-à-vis the Korean Peninsula. That is why according to Scott Snyder and See-won Byun: «China’s rapid revival of its traditional role as North Korea’s staunchest supporter might prove to be the more strategically significant development».
Kim Jong Un’s three visits in less than three months – the first in Beijing on March 27-28, the second in Dalian on May 8, following the inter-Korean summit of 27 April, and again in Beijing on June 19-20, in the aftermath of the historical Singapore summit between Kim Jong-un and Donald Trump – were of great symbolic significance for Beijing, and Xi Jinping in particular. For seven years the two allies never met. In 2014, Xi’s first visit to the Korean Peninsula as the PRC’s president had been to Seoul, not Pyongyang. North Korea’s best friend had snubbed it for its most bitter rival.
Given the relevance of the issue for both parties, it may be interesting to briefly analyze the individual visits, focusing on the salient aspects of each of them.
The first two trips were both «unofficial» and followed the tradition of China state media placing a moratorium on the announcement until the Democratic People’s Republic of Korea (DPRK) leader was on his way home. The third was similar to the time-honoured visits of foreign heads of state, and as such heavily covered in newspapers and television news bulletins. Symbolically the most important visit was the first, in terms of both its timing and unexpectedness. Most probably the Chinese leadership had reached its decision to issue the invitation at the beginning of March after
the surprise announcement that the US president would meet Kim Jong Un to discuss Pyongyang denuclearization; Beijing risked possible marginaliza- tion in what were likely to be historical talks. One striking aspect concerned the style of the visit. Kim and his wife were «treated lavishly and showered with luxury gifts» by Xi Jinping (including expensive alcohol banned under UN sanctions). But of utmost importance was the deference showed by Kim Jong Un and the words pronounced by the North Korean leader in his toast to the Chinese president, as reported by the North Korean state news agency KCNA: «It is appropriate that my first trip abroad is in China’s capital, and my responsibility to consider continuing North Korea-China relations as valuable as life». That was a worthy accolade for all of China’s previous efforts, and one that allowed Beijing to save its face, finally.
The second meeting, on 8 May in Dalian, projected quite strangely the image of an already well-established relationship between the two leaders, despite the fact that it was «newborn», about to prepare for the Kim-Trump meeting. Chinese reports quoted Kim Jong Un as reiterating his country’s longstanding position that: «As long as relevant parties abolish their hostile policies and remove security threats against the DPRK, there is no need for the DPRK to be a nuclear state and denuclearization can be realized», and referring to «phased and synchronous measures» to «eventually achieve» a formal peace treaty. For his part, Xi was reportedly emphasizing the restoration of the «traditional friendship» as fellow socialist countries, underscoring the «irreplaceably significant» role of high-level exchanges to the development of strategic communication, mutual trust, and the safe-guarding of common interests, and pledging to strengthen people-to-people exchanges between the two countries. At the same time Xi expressed China’s willingness «to continue to work with all relevant parties and play an active role in comprehensively advancing the process of peaceful resolution of the peninsula issue through dialogue, and realizing long-term peace and stability in the region».47 Above all, the main message of the Dalian meeting, as pointed out by Scott Snyder and See-won Byun, was that Beijing would be included «in the process designed to pave the way for new political arrangements on the peninsula».48 The «Panmunjom Declaration» made explicit reference to a peace treaty among three or four parties (North Korea, South Korea, the United States, and China).49 Not surprisingly Xi Jinping emphasized more the geostrategic importance of the renewed bilateral ties than the Peninsula’s denuclearization.
For the third visit on 19-20 June, as before, Kim Jong Un arrived in China much like any other foreign leader, landing at Beijing’s international airport and being driven by limousine to the city centre. Contrary to the previous two visits though, China state media announced that the Korean leader would be visiting Beijing for two days, shortly after his arrival in the capital50 and released photographs of Kim Jong Un meeting with Xi Jinping at the Great Hall of the People – where foreign head of states are usually greeted – while the visit was in progress. The Chinese state press agency Xinhua reported that the two leaders «agreed to safeguard, consolidate and develop China-DPRK relations, and jointly push forward the sound momentum of peace and stability of the Korean Peninsula to make a positive contribution to safeguarding world and regional peace, stability, prosperity, and development», with almost no mention of denuclearization. In fact, analysts agreed that Kim went to China to brief Xi on the Singapore summit, seek economic assistance, as well as show respect and deference to Beijing, which for its part was eager to underline its crucial role in talks between Pyongyang, Washington and Seoul.51
In the eyes of many international observers China proved to be the biggest winner of the Singapore summit for two main reasons. On the one hand, the agreement adopted by Trump and Kim which granted a de facto dual suspension of North Korean tests and US-ROK joint military exercises (so called «freeze-for-freeze approach») was similar to the proposals that Beijing had been promoting for months. On the other hand, the US president gave assurance of China’s inclusion in the formal replacement of the armistice with a Korean peace treaty.52
At the same time, according to Andrei Lankov, one of the world’s leading Korea experts, and director of the Korea Risk Group, visiting Chi- na for the third time in such a short period, Kim might be seeking to take advantage of the trade conflict between China and the US, and trying to deepen their rivalry to ensure they could not join forces against him, as happened with UN sanctions over North Korea’s weapons programme. In this regard, according to Lankov, Kim Jong Un was turning out to be a «very good diplomat».53 Last but not least, Pyongyang might be hoping Beijing would ease up on sanctions following the summits with Seoul and Washing- ton. In any case, the support of its main ally was probably seen as essential for the redefinition of the North Korean foreign strategy.
A further step in the consolidation of the renovated Sino-North Korean strategic ties involved Li Zhanshu, chairman of the NPC, who attended the 70th anniversary celebration of the DPRK’s founding in Pyongyang in September, as Xi‘s special representative.54 Previous reports had suggested Xi Jinping would travel to Pyongyang to meet with Kim Jong Un in what would have been the fourth summit between the two leaders in 2018, and the first visit by a Chinese leader to North Korea in over a decade.55 Reportedly there was intense debate in Beidaihe during the so-called «summer summit»,56 about Xi visiting Pyongyang for the celebrations. Not surprisingly the main focus of the debate was how his visit to North Korea might affect China’s difficult relations with the US.57 In fact, the Chinese president’s trip would have taken place at a time when the US President was pointing fingers at China for «[…] [not] helping with the process of denuclearization», due to trade tensions.58 But Xi Jinping’s decision to send a representative might also be related to concerns about China appearing to support North Korea’s nuclear weapons programmes, especially considering that Kim might choose to show off his nuclear-capable ballistic missiles at the parade.
Ultimately, the three visits reinforced China’s view that it was a driving force behind developments on the peninsula. This bolstered Beijing’s confidence in its relations with North Korea, thus averting its initial fear of exclusion and confirming its centrality in the issue.59
As to the substance of the renewed bilateral ties, Andrei Lankov did not hesitate to express his reluctance since in his view there was no love lost between the two powers: «Let’s not have illusions. China and North Korea don’t see each other with any kind of mutual sympathy. There are zero warm feelings between the two countries». For Lankov, «China is seen as a potential threat, almost as much as the US is. The Chinese see North Korea as irrational, unreliable, ungovernable, highly dangerous».60 Put another way, considering the long history of scepticism and tension between the two sides, they could be considered at least «partners of convenience».
5. Strained relations between China and the US: beyond the iron fist on tariffs
As in the year 2017, in 2018 relations between China and the US presented many ups and downs, with strong deterioration on the commercial side. In particular, the second part of the year under review was mainly characterized by the open hostility of the Trump administration towards China, as clearly shown by the trade war and the deep-rooted distrust between the two countries in many chapters of their foreign policy agenda, with special reference to the Korean peninsula.
Since China’s inclusion in the list of countries that «challenge Amer- ican power, influence, and interests, attempting to erode American security and prosperity» and «are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence» (mentioned in the first Trump administration’s National Security Strategy61), the US president never ceased to underline his intentions of promoting American national interests, frequently repeating the «America First» mantra, while defending his right to do so. Accordingly, Washington launched what the Chinese Ministry of Commerce considered as the «largest trade war in economic history» (经 济史上规模最大的贸易战).62
The dispute started in January 2018 when the US approved contro- versial tariffs on imported washing machines and solar panels to «defend American workers, farmers, ranchers and businessmen»,63 in what was seen as Trump’s most significant trade move since his decision to abandon the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). The move was highly criticized by both China and South Korea. In particular Samsung called the tariffs «a tax on every consumer who wants to buy a washing machine», while China, being the world’s biggest solar panel manufacturer, complained it would further damage the global trade environment.64
But the «real» war started at the beginning of July and was aimed in the eyes of the American president at resolving some long-standing issues that went far beyond trade imbalances with the PRC. Trump was especially keen to punish Beijing for years of unfair trade policies, including stealing American intellectual property for the benefit of the Chinese economy, and the end of the policy of subsidy and state support to the technology and innovation programmes of Chinese state-owned enterprises.
Washington imposed three rounds of tariffs on Chinese products, totaling US$ 250 billion worth of goods. China retaliated in kind, imposing tariffs on items worth US$ 110 billion.65 Despite its brevity – it ended with a «90-day truce» signed in Buenos Aires by the two countries’ presidents on the sidelines of the G2066 – it risked damaging the global economy. At the beginning of October, the IMF released a report which projected a down-turn in the global economy growth, a result of Trump’s trade policies.67
In the midst of growing trade tensions, other factors contributed to further deteriorate bilateral relations.68 In the second half of September Washington imposed sanctions against a unit of China’s Defense Ministry (China’s Equipment Development Department, EDD) and its government director (Li Shangfu) for purchasing Russian military equipment, in violation of a US sanction law punishing Moscow for meddling in the 2016 US elections. The sanctions blocked the EDD and his director from applying for export licenses and participating in the US financial system. The US also added them to the Treasury department’s list of specially designated individuals with whom Americans were barred from doing business.69 At the same time Washington announced the sale of US$ 330 million worth of military equipment to Taiwan. 70 In mid-October the US despatched two US Air Force B-52 bombers to fly over the hotly-contested South China Sea, thus sending a clear message about China’s determination to continue to fly and sail «whenever international law allows».71 It should be noted that those flights came just a few weeks after a showdown between a Chinese destroyer and a US navy warship near the Spratly Islands.72 Meanwhile, the US president and Vice President Mike Pence accused Beijing of meddling in the upcoming American mid-term elections.73
The prevailing mood at the G20 Summit in Argentina was tense, especially considering the open hostility between the two parties during the APEC Summit in Papua New Guinea (17-18 November), where Mike Pence warned countries in the Indo-Pacific region not to fall into the trap of Chinese debt diplomacy, instead encouraging them to choose «the better option» of American development financing.74 During his sharply-worded speech Pence also stated that «Authoritarianism and aggression have no place in the Indo-Pacific», clearly referencing China.75
Xi Jinping and Donald Trump’s encounter in Buenos Aires, on the sidelines of the G20 Summit, was the first face-to-face meeting between the two leaders in nearly one year, and the first since Trump began the trade war.76
Many observers in their analysis pointed to the importance of the leaders’ personal chemistry as a means of dispelling the possibility of a new Cold War.77 According to Ni Feng, a specialist on Sino-US relations at the Chinese Academy of Social Sciences, «In the history of China-US relations, it has always been determined by the top leaders.»78 Zhang Baohui, an international relations expert at Lingnan University in Hong Kong also agreed, arguing that a successful meeting would at least «slow down the momentum of a new Cold War», while a bad one would «make that irreversible.»79 In this sense, the meeting was considered as «a testament to how much trade and the personal chemistry between Mr. Trump and Mr. Xi have come to dominate the relations between the United States and China. While these are only subplots in a larger drama that also includes a military contest in the Pacific and nuclear negotiations with North Korea, they could also define the next chapter in that relationship».80
After dinner, both presidents appeared satisfied with their «highly successful meeting». In particular, Trump referred to «an amazing and productive meeting with unlimited possibilities for both the United States and China».81
That said, at exactly the same moment the two leaders were dining together in Buenos Aires and agreeing to a «90-day trade truce», Meng Wanzhou, top executive and daughter of the founder of the Chinese tech giant Huawei, was arrested in Canada, at the request of the United States, for alleged violations of US sanctions to Iran.82 Meng was charged with conspiring to violate sanctions on Iran by doing business with Teheran through a subsidiary (Skycom) which she had tried to conceal. If the accusations were confirmed she risked a maximum penalty of 30 years in prison. It was immediately evident to observers and analysts that Meng was a mere «hostage» in the Sino-American trade war. 83
Tensions between US authorities and Huawei have been high since 2016. Washington has long viewed Huawei and its close ties to the Chinese government as a threat to national security and the US has been investigating Huawei for possible violations of UN sanctions on Iran. The charges include bank fraud, obstruction of justice, and theft of technology.84 As reported by Hu Xujing, editor in chief of the Chinese and English editions of the Global Times, the US was trying to find a way to attack Huawei and destroy its reputation. In other words, Meng’s arrest was not simply a case about the arrest of a woman, or about a company, but strictly related to the two giants’ technological rivalry, in particular the creation of the new-generation
5G computer and phone market and Huawei’s role in them. According to specialists and observers, this provided the rationale for Meng Wanzhou’s arrest. This was evident by the lively debate unleashed on social media by the intervention of the well-known economist Jeffrey Sachs. On 10 Decem- ber, Sachs published a story entitled «The war on Huawei» stating that the Trump administration was unfairly targeting Meng Wanzhou. Washington had only ever levied heavy fines against senior executives of US companies similarly accused of violating its sanctions regime.85
6. «Two dogs strive for a bone, and the third runs away with it»: the unexpected consequences of the Sino-American trade war
One of the most interesting consequences of the China-US trade war was the thawing in relations between China and Japan. It was preceded by the revival of the trilateral negotiations for a Free Trade Agreement (FTA) between China, Japan and South Korea. Another important effect was the joint strengthening of relations between China and the EU, despite some frictions related to the BRI.
6.1. China-Japan: the pragmatic rapprochement
Interestingly, concern for the global economy caused by the unilateral US trade moves, especially its growing protectionist measures and trade aggression, favoured the revival of the long-stalled China-Japan-South Korea FTA talks, as well as improving relations between Beijing and Tokyo.
At a forum held in Beijing on 19 September, representatives from China, Japan and South Korea vowed to accelerate negotiations for a trilateral FTA, begun in 2012, which had seen slow progress due to political and economic differences among the three countries. Addressing the forum, Kim Jeongil, director general of the FTA Policy Bureau at South Korea’s Ministry of Trade, Industry and Energy, stated that the world was witnessing growing trade protectionism, which created urgency for completing talks on the China-Japan-South Korea FTA and other multilateral trade pacts.86
Chinese economist Chen Zilei, director of the Research Center for Japanese Economics at the Shanghai University of International Business and Economics, agreed that while the acceleration of the trilateral FTA should not be considered a direct countermeasure against the US – given that Seoul and Tokyo remained close allies of Washington – nonetheless, growing US trade aggression and the protectionist climate promoted by the Trump presidency provided the catalyst to resume talks. 87 As mentioned, during the year under review other regional trade pacts have also seen accelerated negotiations, including the Regional Comprehensive Economic Partnership (RCEP), a trade pact between 16 Asian economies. At the same time many countries pursued bilateral trade deals; among them China accelerated FTA talks with the EU, New Zealand,88 while Japan signed a trade agreement with the EU. In Chen’s words: «This is the bright side of the US trade protectionism. It has pushed all these countries to accelerate FTA talks and try to set up a firewall against the US actions».89
Related to Trump’s aggressive stance on trade was the Japanese prime minister’s more convincing rapprochement to China, after the timid gestures in 2017.90 It concluded with Abe Shinzo’s visit to China at the end of October, the first formal bilateral visit by a Japanese leader to the country in nearly seven years.91 Though nominally intended to commemorate the 40th anniversary of the China-Japan Treaty of Peace and Friendship, the visit completed a quiet process of mutual accommodation over the year,92 reflecting realism and self-interest on both sides.
The event underscored Chinese president Xi Jinping’s efforts to reduce his country’s exposure to the US market but it indicated a certain amount of pragmatism on the part of the Japanese prime minister too. By reporting to journalists after meeting with Xi, Abe declared: «From competition to coexistence, Japanese and Chinese bilateral relations have entered a new phase», adding that he wanted «to carve out a new era for China and Japan». For his part, the Chinese president stated that the two neighbours had to move in a «new historic direction» by working together at a time of growing global «instability and uncertainty».93
In other words, while for Beijing the meeting was about pacifying its neighbourhood so that it could concentrate on challenges coming from the US, for Tokyo it was an important occasion to recalibrate Sino-Japanese relations, focusing on deepening economic exchanges while putting aside political problems. Japan was aware that despite the security concerns, the country’s return to economic growth had been in part fueled by the Chinese economy’s growth, and that any sustained economic growth in Japan would necessarily include more, not less, trade and engagement with China.94
The meeting in Beijing was preceded by another bilateral encounter on 12 September during Abe and Xi’s visit to Vladivostok to attend the Eastern Economic Forum. Abe reported that the Japan-China relationship had «return to normal track». This was especially so after an important agreement had been reached in May, following a decade of talks regarding the establishment of a security hotline to defuse maritime confrontations.95 Besides the hotline, the agreement provided for regular meetings between both nations’ defense officials and a mechanism for their naval vessels to communicate at sea to avert maritime incidents. This agreement served to enhance bilateral ties strained by historical animosity as well as the dispute concerning ownership of islets in the East China Sea. The October meeting was a clear demonstration of both sides being able to reach a mutual accommodation, «under the shadow of Trump».96
6.2. The enemy of my enemy is my friend. The consequences for China-EU relations
The China-US trade war, and more generally Trump’s attacks against the global system, represented an occasion for China to strengthen its relations with Brussels,97 despite the growing tensions between the two parties. These were due to both the disruptive effects of the BRI on the continent, and the Chinese strategy towards the Central and South European countries, carried out with the so-called 16+1 Group (or CEEC+1 Forum, 中国与中东欧 国家合作).98 This was particularly evident during the 20th China-EU Summit.
The China-EU Summit was preceded by Trump’s declarations during an interview with CBS at the President’s golf resort in Turnberry (Scotland) – aired on «Face the Nation» on 15 July – when he defined the European Union as a «foe» of the United States.99 That statement became part of Washington’s constant criticism of NATO’s European allies for not spending enough on defense.100 Although it was not new for a US president to push NATO members to spend more on defence, nonetheless the harshness and frequency of Trump’s attacks were without precedent.101
The importance of the 20th EU-China Summit was manifest in its lengthy final Joint Statement; due mainly to disagreements over granting «market economy» status to China, and other disputes over the South China Sea and trade, the previous two summits had ended without joint statements. Interestingly, at 2018’s summit, China mentioned neither the mar- ket-economy topic nor the issue of the arms embargo.102
On paper, the main achievement of the summit was a Chinese agreement that the World Trade Organization had to be reformed if it was to survive the «Trumpian times».103 During a meeting with Donald Tusk (president of the European Council) and Jean-Claude Junker (president of the European Commission) on the sidelines of the summit, Xi Jinping told his guests that China and the EU could not watch the old world order be destroyed and a vacuum being created. For his part Tusk, referring to the Helsinki meeting between Trump and Putin, stated that «the architecture of the world is changing before our very eyes» and urged Europe, China, Russia and America «not to destroy this order but to improve it».104 That said, the summit was characterized by a particular closeness between China and the European Union, which was by no means obvious.
The fact that the 16+1 Group summit – held in Sofia on 6-7 July – was postponed by almost half a year from its original schedule, at Beijing’s initiative, to only a few days before the EU-China Summit, irritated many officials in Brussels and left some EU 16+1 members embarrassed.105 For example, Poland – the biggest European 16+1 economy – was represented in Sofia by its deputy prime minister, while its prime minister stayed home to attend a pilgrimage.106
The main reason for the postponement resided in the fact that Beijing remained unmoved by the loud calls from Berlin, Brussels and Paris to tone down its 16+1 activities.107 Rather, China had sought an intensification and broader institutionalization of the Group, while welcoming the interest expressed by Austria and Greece (16+1 observers) to full membership of the format. Furthermore, Beijing had not given up the idea of establishing additional sub-regional grouping in both Northern and Southern Europe.108
But the majority of frictions were to be found in the perceived aggressiveness of the BRI, since the vast majority of BRI projects in the CEE region remained firmly in the hands of Chinese leaders and companies. It was apparent that China’s BRI-related infrastructure projects were creating an economic and financial instability in the EU’s regional neighbourhood, through the so-called «debt trap», i.e. the debts incurred by countries as they took on BRI loans from Beijing, leaving them vulnerable to China’s influence.109 Moreover, in the majority of cases those projects did not respect EU rules and standards for building large-scale infrastructures, from transportation to energy and communications. These were some of the reasons why, in April, the overwhelming majority of EU members’ ambassadors to China – with the exception of the Hungarian – signed an internal report sharply criticizing China’s new Silk Road project, denouncing it as «designed to hamper free trade and put Chinese companies at an advantage».110 In the report, leaked to the German newspaper Handelsblatt Global, the 27 EU ambassadors blamed China’s intention to shape globalization to suit its own interests. Additionally, they warned that European companies would refuse to sign any contract if China failed to adhere to the European principles of transparency in public procurement, as well as environmental and social standards. At the same time, EU officials accused China of attempting to divide Europe in reference to its strategy with individual member states, such as Hungary and Greece, which both relied on Chinese investments, and had in the past shown their susceptibility to Beijing’s pressures.111
The Ambassadors’ report was intended to be presented during the China-EU summit in July, but reportedly it was not. Maybe the trade war unleashed by Trump and more generally his widespread offensive against the multilateral system of the last seven decades, and his attacks on the European allies, contributed to question everything.112
Many of the criticisms made by the US president in defense of his protectionist stance were, as always, that the European countries had being moving to China for a long time.
7. The Belt and Road Initiative on its 5th anniversary
In 2018, as China’s Belt and Road Initiative turned five years old, it continued to develop and become more widespread and to growing criticism.
During those five years, the BRI has experienced a great evolution, from an initiative solely focused on infrastructure to one which also includes industry, technology, cultural, legal and environmental components. At the same time, the BRI has been enlarging its geographical scope by shifting its focus from the historic Silk Road region to the entire globe. Chinese leaders have also been setting increasingly ambitious goals for the Initiative: from economic development to constructing a «community of shared destiny for all mankind». Finally, its inclusion in the party constitution confirmed its status as a long-term project, much like Deng Xiaoping’s «reform and opening-up» policy.
According to Xinhua, in the year under review Beijing signed 123 cooperation documents on BRI development with 105 countries (in Asia, Africa, Europe, Latin America, and the South Pacific region) and 26 similar documents with 29 international organizations.113
In particular, the 2018 Beijing Summit of the Forum on China-Africa Cooperation (FOCAC) gave China the opportunity to sign Memorandum of Understandings (MoUs) with 37 African countries (and the African Union), which, according to Xia Qing, an official with the National Development and Reform Commission (NDRC), accounted for 70 percent of the 53 African nations attending the summit.
On 5 December, Portugal joined the list of European countries to sign such a memorandum.114 Interestingly, Lisbon not only signed, despite pressure against doing so from both the European Union and the US State Department, but the communiqué stated that both parties agreed to jointly encourage the strengthening of the EU-China Strategic Partnership, and work towards developing «synergies» between the BRI and EU connectivity and investment strategies.115
At the same time, views on the BRI grew increasingly polarized, not only between countries, but also within them. The most emblematic cases regarded the US, with the Secretary of State Mike Pompeo issuing a warning to Panama and other nations in the region about the potential dangers of accepting Chinese investments,116 and the EU, with the afore- mentioned letter of condemnation of the BRI signed by 27 of the 28 EU ambassadors in Beijing (see § 6.2.).
A remarkable example of the growing polarization within countries occurred in the Australian state of Victoria. In October it independently joined the BRI by signing a MoU with Beijing, despite the resistance of Canberra.117
7.1. The growing focus on debt and international standards
As already analysed in the previous issue of Asia Maior,118 China’s financing and building infrastructures in developing countries, labelled «debt-trap diplomacy», and the inadequacy of Chinese projects which did not respect international standards, were the subject of severe criticism.
This is why some countries have actively resisted China’s calls for them to sign BRI MoUs, while simultaneously trying to work with Beijing to improve the debt sustainability of the Initiative and ensure it meets international standards. To this end, the British government appointed Sir Douglas Flint, former Chairman of HSBC, as its BRI envoy, to ensure that projects become more bankable and open to financiers from around the world.119
Much of that criticism continues to focus on the debt incurred by countries as they take on BRI loans from China.120 A study conducted by three researchers from the Washington-based think tank Center for Global Development (CGD), confirmed that BRI elevates sovereign debt risks in some countries involved in the Initiative.121 In particular, of the 68 countries identified as potential borrowers, 23 were found to be already at a «quite high» risk of debt distress. Among those countries was Sri Lanka, which in December 2017 transferred the control of Hambantota port, built using Chinese loans, to China Merchants Port Holdings, a state-owned port op- erator.122 Furthermore, the study revealed that eight of those 23 countries, namely, Djibouti, the Maldives, Laos, Mongolia, Montenegro, Pakistan, Tajikistan and Kyrgyzstan, would most likely face difficulties in repaying their debt because of future financing related to BRI projects. Pakistan was considered by far the largest country at high risk, with Beijing reportedly financing about 80 percent of its estimated US$ 62 billion additional debt. Laos was no better, considering its several BRI-linked projects which included a US$ 6.7 billion China-Laos railway that represented nearly half the country’s GDP, leading the IMF to warn that it might threaten the country’s ability to service its debts.123 The eight-countries list also included a Eu- ropean country – Montenegro – that saw a sharp increase in its debt after accepting a Chinese loan in order to construct a highway linking the port of Bar to Serbia. However, the project risked collapse as Podgorica’s debt was expected to approach 80 percent of gross domestic product (GDP) by the end of 2018. Again, the IMF intervened stating the country could not afford to take on any more debt to finish the ambitious project.124
These episodes were symptomatic of the multiple setbacks and failings that Xi Jinping’s Initiative face. Furthermore, they have the potential to derail China’s carefully-laid long term plans for achieving its national «dream».