Zachary Keck

China’s Dictatorship Diplomacy Implodes

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Zachary Keck

China’s Dictatorship Diplomacy Implodes

All around the world China’s support for authoritarian states is backfiring.

A few years back it was fashionable in some circles to talk about China’s dictatorship diplomacy. This term referred to Beijing’s close economic and sometimes political cooperation with international pariah states, particularly resource rich ones. Core members of this group included Iran, Venezuela, Sudan and Zimbabwe, and to a lesser extent, North Korea and Burma.

Often times, China’s dictatorship diplomacy was portrayed as an important advantage Beijing had over Western governments. That is, China was willing to overlook these governments’ human rights abuses, while Western governments largely shunned them. Beijing was able to reap the benefits of a lack of competition.

I always felt this notion was problematic on a number of counts, starting with its suggestion that Western governments prioritize moral considerations above all else in formulating foreign policy. The Western world, of course, maintains strong economic and political ties with many an unsavory regime, some of which are every bit as repressive as some of China’s partners. Indeed, the reason why the West usually shuns these latter states has less to do with their track records at home and more to do with their foreign policy orientations.

That being said, the West’s willingness to blacklist China’s partners is also facilitated by the fact that most of them are erratic and unstable, making them unattractive places to conduct business in the first place. This may not be the main reason for the West’s disdain, but it lowers the opportunity costs the West pays for its attempts to isolate them.

This underscores, however, that far from being a strength, China’s dictatorship diplomacy is a sign of its weakness. Because China entered the globalization game relatively late, almost all the most attractive economic partners already had strong and long-standing ties to Western nations. As a result, China to some degree has simply had to settle for the more problematic nations that the West refused to deal with. This inevitably required taking on more risk, and this risk has not paid off for China. Indeed, in the course of just a few short years China’s dictatorship diplomacy has virtually imploded all over the globe.

Take the international pariahs China has cultivated close to home: North Korea and Burma. In the case of North Korea, Pyongyang’s continued belligerence has growing strategic costs for Beijing. It prevents China from forming closer ties with countries like South Korea, while providing partial cover for the U.S. and Japan to build up their military forces in the region.

Economically speaking, North Korea does offer China cheap labor and resources. However, the economic benefits China can reap from its political support for North Korea are severely limited by the absent of any rule of law in the country. Thus, Chinese companies are held hostage to the vagaries of North Korean leaders, who are all too comfortable with arbitrarily terminating long-term contracts on a whim. Chinese companies that nonetheless make huge capital investments in North Korea usually come to regret it, as did the Xiyang Group when its $45 million investment in the Hermit Kingdom was squandered by North Korea’s political games.

The future does not offer much reason for optimism. Although Kim Jong-Un has touted economic reform throughout his tenure, the purge of Jang Song-Thaek and his associates severely undercuts the chances of such reform ever coming to pass. Not only does the purge weaken senior level support for economic reforms, it also killed many of the North Korean technocrats who were most capable of devising and implementing reform policies.

China’s had the exact opposite problem with Burma (also known as Myanmar). Although the country has taken viable steps toward reform (despite countless remaining shortcomings), it has done so in no small part to distance itself from China. Indeed, as Burma’s attractiveness as a place for investment increases, Burmese leaders become more determined to reduce Chinese influence in the country. Far from being rewarded for its long-time support of the Burmese regime, this support in some ways puts Chinese at a disadvantage relative to newcomers like the United States and Japan.

China’s dictatorship diplomacy is in even worse shape outside of East Asia. As noted above, Zimbabwe and Sudan are two African states that are often cited as exemplars of China’s dictatorship diplomacy. In the former, 2013 was marred by political turbulence and infighting among the ruling party that is far from resolved. Meanwhile, the economy last year cruised toward an economic meltdown that many analysts predict will occur in 2014. So far, the government has responded to this economic deterioration by unveiling a policy they called “indigenization,” which, in a nutshell, means nationalization. Although the government has already started to back away from these obviously misguided policies, they cannot have inspired much confidence from Chinese investors.

The last few years have also been turbulent for Sudan due to its messy break up into two states: Sudan and South Sudan. Low-level violence between the two has been frequent, although this was also true at various times when they were still unified. More troubling for China, then, is that as a result of the breakup, South Sudan controls most of the oil reserves that Beijing covets, but relies exclusively on Sudan to transport this oil to foreign markets. Not surprisingly, Sudan has regularly sought to use this as leverage to force South Sudan to make political concessions, resulting in numerous disruptions in exports. Most ominous, however, a political crisis in South Sudan has plunged the country to the brink of a possible civil war, with an estimated 10,000 people being killed in just the last three weeks.

The only core member of China’s dictatorship diplomacy in the greater Middle East is Iran. Here, Hassan Rouhani’s election as president and the interim nuclear deal he struck with the P5+1 serves Chinese short-term interests by reducing the opposition Beijing is likely to encounter in advancing its economic relationship with Iran.

However, whatever short-term benefits China is currently enjoying are outweighed by long-term concern over the prospect of an Iran-Western rapprochement. Should the nuclear standoff between Iran and the West get resolved, China’s Iran policy is likely to encounter the exact same problem it faces in Burma. Until just the last few years, Iran had traditionally leaned towards Europe in its economic dealings. Although the nuclear standoff has forced Iran to depend more heavily on China in recent years, the economic relationship has often been filled with tensions. As a result, there is every reason to believe that Iran will return to its traditional Western-leaning policy should the nuclear issue get resolved, which bodes poorly for China.

China’s considerable investments in Afghanistan and especially Iraq are also under threat. Although Afghanistan and Iraq are not usually considered part of China’s dictatorship diplomacy, they follow the same general pattern. To be sure, in contrast to countries like Sudan and Iran, the West cooperates with Afghanistan and Iraq politically. Still, the potential for instability has limited Western businesses’ interest in making huge investments in both countries. Consequently, in both Iraq and Afghanistan Chinese companies’ willingness to shoulder far more risk than their Western counterparts has allowed them to operate with little competition. However, with NATO troops withdrawing from an already unstable Afghanistan, and renewed sectarian violence in Iraq, it’s quite possible Beijing’s investments will fail to yield much in the way of returns for the foreseeable future.

Finally, in Latin America, China established close ties to Venezuela during Hugo Chavez’s presidency. A lot of this was based on Chinese leaders establishing a close personal rapport with Chavez himself. Thus, Chavez’s death in early 2013 interjected a high level of uncertainty over China’s future in the country. So far, Beijing has managed this well by quickly establishing a strong relationship with Chavez’s successor, Nicolas Maduro. As a result, compared to the other countries discussed above, China’s Venezuela policy has fared pretty well over the last few years.

Still, potential problems lie ahead. Somewhat paradoxically, Chavez is to blame for much of the trouble Beijing may encounter in the country in the years ahead. Specifically, the populist agenda that made Chavez widely popular at home has also saddled his successors with enormous burdens that are likely to slow the economy and complicate politics in the coming years. A slowing economy and political maneuvering make Venezuela’s prospects for stability far from certain. Thus, while Venezuela has so far proven to be a rare relatively bright spot for China’s dictatorship diplomacy, the road ahead looks as bumpy as it has been elsewhere.