Economic Diplomacy Alone Won’t Make China a Leader


Recently the growing rivalry between the United States and China seems to be spilling over into the economic and institutional arenas. The U.S. is leading the push for the Trans-Pacific Partnership, a new regional free-trade agreement which excludes China. And Beijing appears to be implementing a new strategy for transforming its own economic strength into regional leadership.

Whereas China previously used bilateral channels to build relationships and acquire influence, it’s now leading multilateral initiatives, headlined by the US$50 billion Asian Infrastructure Investment Bank and US$40 billion Silk Road Fund—the latter planning to build a network of trade-and-transport infrastructure linking China to Central and South Asia, the Middle East and Europe. Those initiatives have the potential to eclipse the World Bank and Asian Development Bank as the dominant multilateral lending institutions in Asia, shaking the foundations of the regional order set up by the United States following World War II.

Beijing is also pushing back on the multilateral trade front, securing an agreement from APEC leaders for a two-year study of a Free Trade Area of the Asia-Pacific. The FTAAP could become a direct competitor to the Trans-Pacific Partnership, the central economic component of the Obama Administration’s rebalance to Asia.

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There’s a clear strategic logic to China’s multilateral approach. The existing system is a product of US leadership and undeniably favours American interests, but it’s also open, rule-based, and structured around institutions. As John Ikenberry has argued, countries accepted American leadership in part because they were given a say in how the regional order was built and maintained.

China has recognised that it can’t join (or replace) the United States as a regional leader without offering a degree of continuity with current arrangements. States around the region have flourished under the stability, certainty and reciprocity of the existing order, and are unwilling to give up its cooperative and collaborative aspects, even if they’d receive billions in development assistance in return.

Leadership can’t simply be bought with economic largesse. Economic incentives are certainly a good way to begin a political realignment, but they’re rarely enough to conclude one. An essential ingredient is lacking—security. The American order ultimately endured because it made the majority of governments and peoples in the region feel secure (admittedly with some notable exceptions). Washington’s great achievement was to lead without seeming to threaten countries’ core interests in sovereignty, security and autonomy. The alliance network was a critical ingredient in that accomplishment, not just because it offered security against external threats, but because alliances helped America manage its bilateral relationships, providing reassurance and making American power more “predictable and user-friendly.”

Countries will oppose the leadership of a great power under whom, for whatever reason, they feel insecure. And despite its lucrative economic offerings, China is making many in the region nervous. Escalation of China’s maritime disputes in the East and South China Seas, Xi Jinping’s declaration that “security in Asia should be maintained by Asians themselves,” and outbursts by senior officials at regional fora, all raise doubts over whether China’s displacing of the United States would necessarily be in the region’s best interests.

Reassurance is the key to leadership. If it wants to lead, China needs to convince its neighbours that it doesn’t pose a threat to their fundamental security interests. The mantle of leadership will burden the rising power with a series of costly choices. Will China exercise power forcefully and arbitrarily, or with restraint and rule-based commitments? Will China act to maximise its short-term interests, or make beneficent sacrifices in the name of long-term stability? Is China a security threat, or can it be a security provider?

No one said leading was easy.

Darren Lim recently received a PhD from Princeton University and is a visitor in the Department of International Relations at the Australian National University’s College of Asia and the Pacific. This article was first published in The Strategist, the Australian Strategic Policy Institute blog, and is reprinted with kind permission.

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