China’s Charm Offensive II: The Tools Of Business

So how does China manage to woo developing nations (particularly its neighbors and “strategic” partners like Angola and Sudan)? Joshua Kurlantzick believes China now deploys more sophisticated tools of influence, which can be categorized as “tools of culture” and “tools of business”. The “tools of business” are an exceptionally potent group of options and strategies that offer a variety of ways for China to fulfill its policy objectives of “negating fears of its rise, developing its poorer internal regions and asserting itself in areas where other major powers have lost influence or interest.”

“China’s tools of business, in fact, have become powerful enough that even when people like Harry Roque (a Filipino lawyer who tried to challenge a highly questionable Chinese railroad bid on waste and corruption grounds) raise concerns about Chinese aid and investment, their own governments sometimes shut them up.”

China’s economic growth allows it to overpower the objections of environmental, political and social activists in neighboring countries and elsewhere. Offering lucrative investment opportunities to Cambodian elites with which to enrich themselves so they will allow Chinese dam projects on the Mekong River is just one example of many in which Chinese interests can increasingly trump local concerns.

“China has … tried to demonstrate that as it grows, it also will become a much larger consumer of other nations’ goods, creating “win-win” economics, central to the idea of China’s rising peacefully. ….Chinese officials often try to do so by providing trade and investment and tourism targets. These targets, for five or ten years in the future, tend to be enormous and to obscure the fact that, at present, Chinese direct investment into regions like SE Asia and Latin America still lags far behind investment from the US and other wealthy countries like Japan.”

As the powerhouse in SE Asian economics, China may be able to lift millions of its neighbors out of poverty in the future if the Chinese market does substantially open up, a process that is far from happening yet, and a trend that causes China to place a premium on hyping “win-win” economics to potentially insecure neighboring publics who could conceivably hold their democratic leaders accountable.

“The Chinese government encourages firms to invest in strategic industries (petrol, natural gas and mining) and select countries. …. These national champions enjoy a range of benefits that will help them compete, including low-interest funding from Chinese banks…. ..because many Chinese companies gained experience in China, a developing nation itself, “their better understanding of emerging markets provides a stronger guarantee of success in their initial overseas expansion plans.” In other words, with their background in China’s often lawless business climate, Chinese companies have the experience to invest in Liberia or Cambodia or many other countries with little rule of law.”

Here Thomas PM Barnett’s hopes of the positive usage of Chinese policies and boots on the ground (not just military but the full spectrum of infrastructure builders, i.e. “Development-In-A-Box”) in places like Liberia and Cambodia are not only believable but possible, if coordination between Chinese firms motivated by profit and opportunity and developing world aid groups and political groupings would occur. Unwillingness on the part of many “Old Core” (i.e. the West and Japan) businesses to invest too heavily in iffy climates can be offset by the experienced Chinese firms. On the other hand, if resource wars are the wave of the future, China is bringing its A game to the contest while most dawdle behind.

“China’s diplomatic style of signing many agreements during foreign visits by its top leaders earns it considerable initial goodwill and positive media coverage. But often the agreements are merely letters of intent. In Latin America and Asia, when officials from local boards of trade and investment follow up, they sometimes find that Chinese officials had laid no groundwork to put these letters into practice.”

As Kurlantzick points out, this could backfire on China in the future, but for now the beauty of low expectations enables China to enjoy “what Chinese scholars call the “maxi-mini” strategy, where Chinese aid attempts to get the maximum return from the minimum outlay” as in the 2004 tsunami relief effort where American aid in particular dwarfed Chinese contributions yet China enjoyed near equal coverage and appreciation from regional media and political power blocs.

Chinese diplomacy, investment goals and policies all require it to use its tools of business as never before in order to woo China’s often skeptical neighbors and potential new friends.  Building itself as as the friend of developing countries, unlike the human rights obsessed, tariff-hypocritical developed world powers, its tools of business play a serious role in successfully advancing Chinese interests.  While 100% coordination among businesses and Chinese migrants (who Kurlantizick identifies as playing a huge role in changing the nature of China’s borders to become free-flowing exchanges of goods and services even in basket cases like Burma, Siberia and alongside North Korea.) as well as other actors is impossible, China still is managing its efforts with its authoritarian structure much easier and better than democratic rivals and neighbors.

Next: China’s challenges in deploying its soft power to meet its objectives and how the US fails to respond.