“The likelihood of conflict is low but non-negligible” when it comes to China’s perspective on Japan’s remilitarization, said Daniel Wagner, CEO of Country Risk Solutions, during the second half of his Global Association of Risk Professionals webinar on October 22, 2013. After surveying Sino-American relations in Part 1, Wagner guided the audience through an in-depth look at China’s evolving geopolitical position in Asia and Africa.
Japanese Prime Minister Shinzo Abe has raised military spending, loosened constitutional constraints on military action, and given a high profile to the Senkaku Islands dispute. Sabre-rattling occurs, but Wagner doubts that China and Japan would let it become an open dispute.
Although China is globally number 2 in military spending, it knows that it still has inferior sea/military resources. It wants to have the largest blue-water navy so that, if necessary, it could engage in “high stakes on the high seas.” The military strategy centres on a “strike with speed, fury, and little warning.”
China wants to soothe the fears of other members of Association of Southeast Asian Nations (ASEAN). About twenty years ago, China had a bad reputation in ASEAN for supporting bad regimes. He characterized it as “the 800-pound gorilla” among member nations.
Chinese leaders have been pursuing an active policy of influence through foreign aid. Wagner said that in one decade (2001 to 2011) their foreign aid skyrocketed from $3 billion to over $180 billion. A 2008 report shows the growth in Chinese foreign aid in 2003-2007 among different regions. (Source: NYU Wagner School, “Understanding Chinese Foreign Aid: A Look at China’s Development Assistance to Africa, Southeast Asia, and Latin America,” April 25, 2008.) China favours a multi-polar international set-up among nations. “The door is open for China to engage the world on its own terms.” Wagner believes that “this is China’s century” and global leaders will be dealing with a “shrewd negotiator that bargains hard when it needs to.”
Overseas foreign direct investment (OFDI) has followed a typical pattern. China has stepped in where developed countries and multilateral development banks (MDBs) fall short. Much of the foreign aid has gone to Africa. China is Africa’s largest trading partner today, with $200 billion flowing between the two. Some African nations object to the importation of Chinese workers, instead of hiring local people. “There’s been a lot of blowback,” said Wagner. Priorities are shifting away from natural resources to goods. In 2012 Nigeria, for example, imported more from China than it does from US and India combined.
Chinese OFDI targets extend beyond Africa, all the way to Latin America, and include some massive projects. For example, China intends to make a “second Panama Canal”—situated in Nicaragua. Initial cost estimates are $40 billion spent over eleven years for a canal three times the length of the existing canal.
Wagner posed the question: “is the US losing Egypt to China?” He pointed out that President Morsi’s first official visit was to Beijing. Sino-Egypt trade has grown 46 percent from 2008 to 2011.
Wagner said China on the international stage exhibits a “dual personality.” He would like to see China “embrace its destiny” and shed its “poor cousin” image. Right now, it tends to “cherry pick” which of its international treaties it wants to abide by. Some disputes he finds puzzling, such as the Spratly Islands dispute that the Chinese leaders took all the way to the UN although there are no Chinese inhabitants.
In closing, after a detailed and compelling presentation, Wagner said “this is not your average ‘developing’ country.” ª
The webinar presentation slides can be found at: http://event.on24.com/r.htm?e=686972&s=1&k=6DFE3B2BCC31F8985C8F9EA765820D68>
Daniel Wagner’s latest book can be found at: www.Managing Country Risk.com
Check out other resources available at Country Risk Solutions: www.countryrisksolutions.com
The previous GARP presentation by Daniel Wagner (on the Eurozone) is summarized at: http://textmedic.ca/global-implications-of-the-eurozone-crisis/