The Hunt for Strategic Infrastructure: Geo-economics of China’s Territorial Ambitions

Abstract: From an emerging to an established powerhouse in the region, China’s rise to power in Asia has been afforded by a series of strategic policies within a larger grand strategy, which has undermined central tenets of the Westphalian concept of sovereignty and territory. Through the revival of the Silk Road, China has acquired key infrastructure in Asia and Africa by leveraging weaknesses in international fiscal policies and lending programmes. Thus, territory, for China, is no longer limited to large swathes of land, but instead centralises the pivotal power of strategic, critical infrastructure. Thus, this article aims to highlight the current progress of the Belt and Road Initiative (BRI) while advocating for a geo-economic frame of analysis to draw out the necessity for reforms of existing territorial dispute mechanisms.

By Smera Jayadeva

Introduction

China of the 21st century is a force to be reckoned with; not merely because of sovereign territorial claims over 9,596,960 sq km [1] and a population of over a billion people, but also due to unprecedented economic growth following economic reforms in 1969. By closely following Deng Xiaoping’s famous dictum: “Hold your position, hide your capacities, bide your time,” the idea of China at the centre of the world gained traction as the Middle Kingdom was in the process of being re-established. However, this strategic approach to regional and international politics has since been replaced by a more assertive blueprint for the state.

Under Xi Jinping, plans for the “great rejuvenation of the Chinese nation” have altered the future of China’s role in an increasingly multipolar world. Of significance, particularly for the 18 countries with which China shares land and maritime borders, [2] is the revival of the ancient Silk Road through the Belt and Road Initiative (BRI). By analysing territorial disputes through a geoeconomic lens, the subtle nuances of far more complex territorial disputes can be brought to light.

The Economic Saviour of the East?

The current world order influences nation-states to formulate policies based on relative power. Regional power dynamics and the role of globalisation are merely two pieces of a larger puzzle that reveal the intricacies in Chinese administrative power and policymaking. However, if the very nature of power, as derived from knowledge, wealth, and coercion, is subject to transformation, then sovereign entities will attempt to fill the power vacuum in an anarchic world order strategically employing these manifestations of power. [3] For China, the outcome is unveiled in its rise as an emerging powerhouse within and beyond Asia.

The era of globalisation, however, has made some scholars question if territorial expansion serves a role in the pursuit of profit. Erik Gartzke maintains that in supply chains of the globalised world order, there is production interdependence and it is human capital and technology that is essential to a nation’s wealth, instead of land. [4] With a tightening grasp on global flows of information, technology, and labour, China provides a unique case for analysis.

To a large degree, particularly within the regional environment, goods and services still require essential infrastructure for transport and development of markets. The BRI provides exactly that.

China’s investment measures and infrastructure loans for developing states will further Chinese foreign and security policies that consolidate territory in a previously unobserved manner. Loans granted to African and Asian states to develop key infrastructure, often as a part of the larger land and maritime Silk Road, are worrisome not merely for the recipient country but other emerging powers in the region. [5] This can be best understood in the case of Sri Lanka.

International organisations, such as the International Monetary Fund (IMF), are often lenders of the last resort to economies. Loans and bail-out plans from the IMF often require structural  changes to the economy through complex transitional policies. Without the capacity to meet the IMF’s fiscal requirements, Sri Lanka moved towards China. Investment financing through Chinese-led development banks such as the Asian Infrastructure Investment Bank (AIIB) or the China Export and Credit Insurance Corporation are offered at market value with a short payback period. [6] Limited by economic stagnation, alongside low profitability of the infrastructure project in the short-term, Sri Lanka failed to repay the loan. The Hambantota Port in the northwest of the island nation was thus leased to China in 2017 for 99 years. [7]

Eight countries have been identified for possible debt-distress from BRI-related financing: Djibouti, the Kyrgyz Republic (Kyrgyzstan), Lao People’s Democratic Republic (Laos), the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan [8]. Research from the Kiel Centre [9] further reveals that these loans are often secured against public assets or commodities. Like the Hambantota Port, many other countries face the risk of losing critical infrastructure to China. In a similar vein, the acquisition of territory to build military bases, as observed in Djibouti, reveals the intricacies of China's policymaking which merges the domains of finance, trade, and security.

Territorial aggression in contested regions around India, particularly in Doklam and occupied Kashmir, and offshore disputes in the South China Sea reveal the changing valuation of territory and the widening lacunae in measures to curtail the same. The creation of artificial islands and the movement of military personnel into the Paracel and Spratly Islands of the South China Sea will not only enable China to defend existing claims but also empower policymakers to aim for more lofty goals in the region. Despite ratifying the UN Convention on the Law of the Sea (UNCLOS), China has repeatedly undermined the authority of the rules-based system. Territory, thus, mandates a new frame of analysis [10] as it moves beyond large tracts of land to strategic outposts and critical infrastructure. On the other hand, neighbouring countries like India have to weigh the costs of aggressive policies of defence during a period of economic stagnation.

Investment and infrastructure development are prerequisites for development that can cement political stability. However, with limited reserves to undertake large development projects, many countries have turned to China for solace. The desperation for capital has allowed China to overtake strategic areas without raising an alarm for conventional territorial disputes.

Conclusion

Territory, a fundamental element in the Westphalian idea of a state, empowers the sovereign while retaining the ability to seduce other states into conflicts for control. The sheer value of the territory, both human and natural, has further heightened the tensions of the security dilemma, if not accelerating the rate of coercion.

By identifying strategic countries and the critical infrastructure within them, China has not only subjected them to comprehensive policies to acquire territory but also revolutionised how and when territory is made valuable; an amalgamation of economics and realpolitik is a fundamental element of this approach. Yet, extant rules-based systems for international arbitration remain undermined by the Asian powerhouse.

Despite warning signs in skirmishes in Siachen glacier or movement of troops into Africa, there has been insufficient international action to restrain territorial aggression and occupation. Limited financing options available for emerging economies to expand and strengthen critical infrastructure can further engender reliance on China. Thus, the Belt and Road Initiative, even at its current embryonic stage, ought to be analysed through a geoeconomic rubric to expand traditional approaches to security, power and territory.


For further reading, see On the contentious subject of Chinese investment in Africa

Sources

[1] Central Intelligence Agency (2020), The World Factbook [online]

Available from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

[2] Zhang, Y. (2016), ‘China and its neighbourhood: transformation, challenges and grand strategy,’ International Affairs, Vol. 92, No. 4, pp. 835-848. doi:10.1111/1468-2346.12653

[3] Toffler, A. (1991), Powershift: Knowledge, Wealth and Violence in the Age of the 21st Century, New York: Bantam

[4] Gartzke, E. (2007), ‘The Capitalist Peace,’ American Journal of Political Science, Vol 51, No. 1, pp. 166-191

[5]  Sharma, M. S. (2019), ‘Is China the World’s Loan Shark?,’ Observer Research Foundation (ORF) [online] Available from https://www.orfonline.org/research/is-china-the-worlds-loan-shark-53148/

[6] Ramesh, A (2019) ‘China in South Asia: Loan Shark or Lender of the Last Resort?,’ The Diplomat [online] Available from https://thediplomat.com/2019/05/china-in-south-asia-loan-shark-or-lender-of-last-resort/

[7] Sirilal, R (2017), ‘Sri Lanka Hands Port Formally to Chinese Firm, Receives $292mln,’ Reuters, Dec 9th [online] Available from https://www.reuters.com/article/sri-lanka-china-ports/sri-lanka-hands-port-formally-to-chinese-firm-receives-292-m ln-idUSL3N1O908U

[8] Hurley, John.; Morris, Scott.; Portelance, Gailyn. (2018), 'Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective,' CGD Policy Paper, No. 121, Centre for Global Development

[9] Horn, Sebastian.; Reinhart, Carmen M.; Trebesch, Christoph (2019), ‘China's Overseas Lending’, Kiel Working Paper, No. 2132, Kiel Institute for the World Economy (IfW)

[10] Kohl, A. W. (2018), ‘China’s Artificial Island Building Campaign in the South China Sea: Implications for Reform of the United Nations Convention on the Law of the Sea,’ Dickinson Law Review, Vol. 121, No. 3, pp. 121-130.