The US double game to contain China

America does not want the emergence of China as a giant in the global hierarchy of states. While issues like the ‘militarization’ of  South China Sea give it the opportunity to attack China and win praise from ASEAN members involved in islands row, US is also very much concerned over the rise of  China as an economic power. Hence, while occasionally admonishing Beijing, Washington also plays the wooing game in an attempt to contain it. For instance, its move to vote in favor of China’s membership in the select IMF basket of currencies is only to stop Beijing’s own drive towards establishing an ‘alternative’ system

Chinese construction on disputed South China Sea island

Chinese construction on disputed South China Sea island

While the recently held US-ASEAN summit was another important occasion for the U.S. for attacking China for making military advances in South China Sea, the disputed islands are far from the focus of their bi-lateral tussle.

Although the joint statement of the summit did not mention China directly, enough had already been said about the increased ‘militarization’ of the region, the crucial need for “lowering tensions” and implementation of “international norms.”

The end of the summit saw U.S. and China making claims and counter-claims regarding deployment of missile system by China on a disputed island.

While the summit was literally littered with explosive content of ‘China threat’ theory, the roots of this imaginary or real threat lie somewhere else. Simply put, the US-China bi-lateral tussle is about one hegemon resisting the emergence of another in the global hierarchy of states.

Although the U.S. is undergoing the crucial ‘hegemonic fatigue’, its resistance against China’s emergence is not merely aimed at denying the latter enough breathing space within the IMF/World Bank controlled global economic system. Nor is the occasional mention of “disputed territory” in South and East China seas the only anti-China strategy the U.S. is following.

As some of the recent developments indicate, there are at least two broader ways by which the U.S. is containing and, at the same time, wooing China through.

The U.S.’ “deep engagement” with the ASEAN countries and periodic comments on the disputed islands in the South China Sea constitute its element of “containment of China.”

A relatively recent example of this was when the US Ambassador to Thailand Glyn Davies berated the Thai government for not “adding its voice” to calls for China to “peacefully resolve conflicts over its appropriation of islands in the South China Sea.” Similar messages and accompanying political and economic threats have been delivered by U.S. to other capitals across Southeast Asia.

As far as wooing China into the IMF/World Bank programed economic system is concerned, the passage of 2010 IMF reform package by the U.S. Congress in December 2015, and the consequent increase of China’s share from a meagre 3% to 8% stand ‘out-standing.’

Not only this, the December 18 US approval of the long-awaited IMF reforms followed another decision of Washington to vote in favor of China’s membership in the select IMF basket of currencies called Special Drawing Rights.

The IMF official statement then declared, “The Board today decided that the RMB met all existing criteria and, effective October 1, 2016 the RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British Pound. “

Can this be called the much-awaited ‘change of heart’ from the U.S.? Not really, since Washington is wooing China into the post Second World War system only to foil Beijing’s own drive towards establishing an ‘alternative’ system, or at least limit its scale. Although we cannot predict at this stage how ‘alternative’ and ‘different’ this system would be, a number of recent developments clearly indicate its formation.

AIIBChina-led developments, especially the establishment of AIIB, have much to do with Asia’s need for financial resources to develop the much required infrastructure. The Asian Development Bank (ADB) estimates that Asia will need $8 trillion over the next decade for energy, transportation, telecommunication and water sanitation. Now private investment in infrastructure runs a mere $13 billion a year, most in low-risk projects. Official development assistance adds another $11 billion a year. There is thus an annual shortfall of almost $700 billion.

This is where China’s ‘alternative system’ becomes relevant; and this is precisely where this system also becomes ‘China threat’ theory, as far as the U.S.’ and its regional allies’ position is concerned.

The announcement for the establishment of an ‘alternative system’, which came earlier this year, has since been followed by some important projections regarding the flow of loans from AIIB to the potential ‘target countries’ of the region. On December 4, at an annual China-South Korea Banking Development Forum in Shanghai, Chen Huan, head of the AIIB’s Multilateral Interim Secretariat, announced that when it begins raising capital on international bond markets beginning January, 2016, the new bank will concentrate on energy, transportation, rural development, urban development and logistics.

Jin Liqun, the president-designate of the AIIB, has stated that the AIIB plans to lend $10 billion to $15 billion a year for the first five or six years, a modest contribution to an $8 trillion infrastructure deficit. While the pronouncements in themselves look ‘promising’, there are some grey areas that certainly seem to dampen the ‘knight-in-the-shining-armor’ status of this ‘alternative system.’

For instance, while Jin Liqun, who was once China’s Alternative Executive Director of China to the World Bank and the Vice-President of the Asian Development Bank, a Japan led by-product of the World Bank, seems to have in his possession enough knowledge about the nature of the IMF/World Bank dominated system and its in-built flaws, what is exceedingly ambiguous about his selection by Beijing is what Beijing actually wants to achieve through him: a system truly different from the IMF/World Bank or a tacit approval for AIIB from the erstwhile ‘masters’?

China’s economic growth notwithstanding, its various initiatives and the response it has received from some European countries such as Germany (read: Germany’s annual $4.5 billion contribution to AIIB, making it the fourth largest supplier of capital to AIIB) do not in themselves constitute enough strength to challenge the Brettonwood system.

China cannot afford to turn on a virtual confrontation mode vis-à-vis the ‘old system.’ The reason is not difficult to understand. Consider this, for instance: In recent years, through a state policy called “go global,” Chinese state-owned companies have sought investment opportunities in the United States. In one of the splashiest recent deals, Ambang Insurance Group, a firm with connections to China’s leadership ranks, bought New York’s Waldorf Astoria Hotel. Indeed, President Xi will be staying at the luxury hotel when he visits the United Nations, displacing its usual occupant, the U.S. President Barack Obama.

Besides it, China is also the fastest-growing national investor in the U.S., targeting real estate, hospitality and technology services, in particular.The Chinese investment is growing in the U.S. though prospects of success in securing a bi-lateral investment treaty are becoming elusive.

For China, the U.S. is an attractive market; for the U.S., China is a rising giant that it needs to contain in order to limit its influence. The development of AIIB, its potential impact and its area of operation are limited, as the name indicates, to Asia only. But China’s own target market exists well beyond Asia. The U.S. is one of the most important of all. This is where the U.S.’ “wooing” strategy becomes relevant.

By wooing China into tacitly increasing its share in the IMF/World Bank, the U.S. is actually aiming at filtering China’s billion dollar investments in the U.S. (as also in Europe) through a system that the U.S. has complete control over. While China cannot, therefore, afford to adopt a confrontation mode, it can certainly use its presence inside IMF/World Bank system to consolidate its own geo-political position in Asia.

It is, perhaps, for this reason China had no problem in raising its contribution to 8%. The U.S. is wooing China. To an extent, this policy of the U.S. is in Chinese interest as far as the latter’s access to the Western market is concerned.

Salman Rafi Sheikh is a freelance journalist and research analyst of international relations and Pakistan affairs. His area of interest is South and West Asian politics, the foreign policies of major powers, and Pakistani politics. He can be reached at salmansheikh.ss11.sr@gmail.com

The opinions expressed in this column are the author’s own and do not necessarily reflect the view of Asia Times.

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