Country Report: China (June 2023)

In early 2023, Chinese analysts explored ASEAN perspectives on the Biden administration’s Indo-Pacific Economic Framework (IPEF). They considered the reasons for different levels of enthusiasm for IPEF among ASEAN member states and evaluated the impact of IPEF on the governance of the digital economy in Southeast Asia. Chinese observers also assessed the implications for regional security and for Chinese interests of Japan’s three new security documents, released in December 2022. Chinese analysts took a close look at Sino–Southeast Asian relations by evaluating the prospects for the development of a Lancang–Mekong regional security community and by developing a framework to explain the variation in how successful China has been in its attempts to build large-scale infrastructure projects in Southeast Asia, a key component of the BRI.

ASEAN Perspectives on the Indo-Pacific Economic Framework
In Dongnanya Yanjiu, 2023, no. 1, Xing Ruili assesses the variation in ASEAN member states’ perspectives on the Biden administration’s Indo-Pacific Economic Framework (IPEF), announced in May 2022. IPEF includes seven ASEAN members: Indonesia, Thailand, the Philippines, Malaysia, Vietnam, Singapore, and Brunei. The remaining three ASEAN member states—Laos, Myanmar, and Cambodia—have not joined IPEF. Xing critiques existing explanations of the decision of these seven ASEAN member states to join IPEF, which rest on economic motivations, a desire to check and balance China, or US attempts to both lure and pressure Southeast Asian countries. Instead, Xing argues that ASEAN member states’ decisions about whether to join IPEF are driven by both their economic expectations about whether they will benefit from joining IPEF and by their perceptions of how much of a threat they face from China. On this basis, Xing groups ASEAN countries’ responses to IPEF into three categories.

The first category consists of countries that have “firmly” joined IPEF because they believe it is in their economic interests and they perceive a threat from China (Singapore, Vietnam, the Philippines, Malaysia, and Brunei). For example, Singapore has promoted IPEF because Singapore is highly dependent on the United States for trade and foreign direct investment and expects to benefit from IPEF’s focus on the digital economy, green economy, and supply chain resilience, all Singaporean strengths. Moreover, Singapore believes that the involvement of external powers like the United States in Southeast Asia can help to balance China and promote regional stability. Similarly, Vietnam views participation in IPEF as an opportunity to promote its economic development as it strives to take advantage of recent interest in shifting production out of China and to develop its renewable energy sector. Vietnam also perceives a substantial threat from China, both for historical reasons and because of their ongoing disputes in the South China Sea. The Philippines, which have longstanding economic ties with the United States, also view IPEF membership as consistent with their domestic economic development priorities and, like Vietnam, have significant disputes with China in the South China Sea. Both the Philippines and Vietnam benefit from joining IPEF because it reduces their economic dependence on China. Although Xing groups these countries in the same category, it is worth noting the significant difference between Singapore, which is not a claimant in the South China Sea, and the Philippines and Vietnam, which are.

The second category consists of countries that have cautiously joined IPEF, either because they expect economic benefits but are not concerned about a threat from China (Thailand), or because they do not expect economic benefits but are concerned about a threat from China (Indonesia).  Thailand is optimistic that IPEF can promote its sustainable development and economic growth and is enthusiastic about IPEF’s four pillars (trade; supply chains; clean energy, decarbonization, and infrastructure; and tax and anti-corruption). Nevertheless, Thailand has been more cautious toward IPEF than many other countries because it does not see China as a significant threat and is more focused on domestic security than on regional security. Thailand values its close cooperation with China (as well as its relationship with the United States) and does not want to be forced to pick sides. By contrast, although Indonesia sees IPEF as an opportunity to attract foreign investment, Indonesia has a history of skepticism about the benefits of closer economic cooperation with the United States due to high levels of economic nationalism and domestic opposition to free trade in Indonesia. Xing argues that from an economic perspective, Indonesia agreed to join IPEF because major ASEAN economies were signing on and it worried that the failure to do so would jeopardize its leadership role in ASEAN, rather than because it expects many economic benefits. Indonesia views China as a threat for several reasons: historical anti-China sentiment, maritime disputes in the waters around the Natuna islands, and concerns about becoming overly economically dependent on China. Consequently, joining IPEF helps Indonesia to balance between the United States and China.

The third category consists of countries that have refused to join IPEF because they do not expect economic benefits and are not concerned about a threat from China (Cambodia, Laos, and Myanmar)—although Xing also concedes that these countries have not been invited to join by the United States. For example, Xing argues that Cambodia is dismissive of the economic prospects of IPEF, which it views as a mechanism dominated by the United States that imposes rigorous standards, rather than a multilateral free trade agreement that would open markets and reduce tariffs. At the same time, Cambodia values its friendly relations with China and supports China’s rise. Consequently, Cambodia rejects IPEF as a US attempt to contain China and “decouple” the Chinese market from the ASEAN market.

Xing argues that the differing positions of ASEAN member states on IPEF have raised concerns about ASEAN centrality and cohesiveness and that it will be difficult for IPEF to promote the economic interests of Southeast Asian countries. Consequently, Xing contends that there are opportunities for China to improve its relationship with ASEAN and ASEAN member states to reduce the negative impacts on China of IPEF, which it views as an obvious US attempt to contain China. At the same time, Xing views the variation in ASEAN member states’ reaction to IPEF as complicating Sino–ASEAN relations and as evidence of US success in “wooing” many of these countries. Xing worries that IPEF might undermine the implementation of BRI and increase the decoupling of various Southeast Asian economies from China. Consequently, Xing concludes that China should emphasize cooperation with ASEAN and adopt a differentiated policy toward various ASEAN member states based on their perceptions of IPEF.

In Dangdai Yatai, 2023, no. 1, Ma Tianyue and Zhai Kun explore the impact of IPEF on the governance of the digital economy in ASEAN, arguing that IPEF is representative of “new Cold War thinking” on the part of the United States and that the governance of the digital economy is a key way in which the United States seeks to contain China. With Southeast Asia’s digital economy developing rapidly and ASEAN signing many recent digital cooperation agreements with external powers such as the United States, Japan, India, and Australia, Ma and Zhai argue that the region is a key location for the United States’ digital competition with China. Ma and Zhai assert that it is most helpful to assess global governance of the digital economy as a geopolitical game among great powers which seek to establish “digital hegemony” and exert influence by writing the global rules; less powerful states may be “digitally colonized,” but may also be able to able to hedge among various great powers to advance their own interests.

Drawing on W. Richard Scott’s three pillars of institutions, Ma and Zhai assess the regulatory, normative, and cultural-cognitive aspects of the governance of the digital economy in ASEAN, which results from the interaction between ASEAN and major powers through IPEF. Ma and Zhai argue that major powers like the United States, Japan, and Australia intervene in ASEAN’s legislative and administrative processes and encourage ASEAN to adopt specific regulations that are in their own interests. They also establish digital standards and norms through means such as policy dialogues, the creation of a regional digital platform, and by strengthening industrial cooperation with ASEAN. Skills training and personnel training focus on elites, the public, and small and medium-sized enterprises.

Ma and Zhai anticipate that cooperation between ASEAN and IPEF member states on governance of the digital economy may hinder Sino–ASEAN cooperation. They are concerned that ASEAN will adopt governance rules that are more aligned with the United States and other Western powers and which are unfavorable to Chinese interests. They are also uneasy about attempts by the United States, Japan, and others to “de-Sinicize” digital supply chains and infrastructure in Southeast Asia and the broader Indo-Pacific, for example by persuading ASEAN member states to reduce their dependence on Huawei and turn to other non-Chinese 5G suppliers. They further criticize the United States, Japan, and other countries for rejecting Chinese technical skills and values, and instead trying to promote their own through training and educational exchange programs.

Faced with US efforts to contain China’s “digital rise” through IPEF, Ma and Zhai argue, China must respond by promoting stronger digital governance cooperation with Southeast Asian states. China should coordinate with ASEAN to establish digital trade rules, solidify its position in digital supply chains, and offer training opportunities to youth, women, and small and medium-sized enterprises in Southeast Asian states. These measures will allow China to participate more actively in ASEAN’s governance of the digital economy and resist the efforts of the United States and other major powers to contain China through IPEF.

Japan’s National Security Policies
In Guoji Wenti Yanjiu, 2023, no. 2, Meng Xiaoru assesses Japan’s December 2022 adoption of three new security documents (the National Security Strategy, the National Defense Strategy, and Defense Buildup Program), arguing that Japan’s decision to adopt a more offensive posture destabilizes both regional security and Sino–Japanese relations. Meng first evaluates the key changes contained in these documents. Japan has decided to pursue a “counterattack capability,” which would allow it (in partnership with the United States) to not only defend against incoming missiles but also to attack missile launch sites in enemy territory. Meng also asserts that Japan has decided to increase its defense budget from an unofficial target of 1% of GDP to 2% of GDP by 2027, although this assertion—like those of many other analysts, including in the United States—seems to misstate the nature of the increase. (The 2% figure refers to all security-related spending and includes both the military budget and other expenditures, such as the Coast Guard and public security infrastructure.) Third, the three documents advocate Japan’s use of “comprehensive strength”—including diplomacy, defense capabilities, economic power, and cyber capabilities—to advance its security objectives. In addition, Meng argues, the National Security Strategy clearly include the concept of economic security for the first time, advocating the promotion of “economic security policies to achieve autonomous economic prosperity.” Finally, the National Security Strategy asserts that China’s current foreign policy and behavior “present an unprecedented and the greatest strategic challenge in ensuring the peace and security of Japan and the peace and security of the international community.”

Meng argues that Japan has shifted away from its post-war defense-oriented posture for a variety of domestic and international reasons. Although Japan has long sought to become a “great power,” making important shifts during the Abe administration, Meng argues, its ongoing strategic competition with China and the “Ukraine crisis” have spurred it to adopt a more assertive military posture. At the same time, Meng contends, Japan is coordinating with the United States to take on more responsibility for its own defense as US power declines and the two countries faced the shared challenge of China’s rise. The security documents portray China as a threat to both the existing international order and to the peace and stability of the Indo-Pacific region.

Unsurprisingly, Meng is fiercely critical of Japan’s decision to pursue a counterattack capability, arguing that this more aggressive Japanese military posture will damage regional security. Meng anticipates that Japan’s enhanced capabilities will strengthen the capabilities of the US–Japan alliance, which would otherwise be diminished by US decline, and will boost US confidence to continue its engagement in great power competition with China. Meng also argues that the three security documents increase the risk that Japan will use force in a regional dispute, for example, to defend Taiwan or attack North Korea. At the same time, Meng criticizes Japan for inviting external powers to intervene in the region, highlighting both the possibility of greater Japanese intervention in the South China Sea disputes and arguing that its invitation for greater European and NATO involvement in the Asia-Pacific will lead to the “NATOization of Asia.” Meng pessimistically predicts that Japan’s new posture will result in a regional arms race and damage regional economic integration. Highlighting Japan’s focus on a possible conflict over Taiwan and territorial disputes over the Diaoyu/Senkaku Islands, Meng charges that Japan’s new security documents damage Sino–Japanese strategic mutual trust and demonstrate Japan’s collaboration with the United States, NATO, and other powers to contain China. There is no consideration of the poor status of Sino–Japanese relations that preceded these 2022 documents or of China’s role in contributing to the frosty bilateral relationship.

Although Meng expects US–Japan security cooperation to strengthen, he anticipates that this relationship will face some limits for reasons both internal and external to Japan. From a domestic perspective, Japan faces economic and demographic pressures that will hinder efforts to increase defense spending. Its decision to pursue a counterattack capability poses constitutional challenges and will arouse strong opposition from pacifists. In addition, Japan will not be able to obtain strategic autonomy or equality within the US–Japan alliance; the United States will determine the amount of independence and power that Japan can have to advance US regional objectives. Furthermore, Japan’s three security documents have raised concerns among its neighbors, most notably China, North Korea, and Russia. Meng further asserts that South Korea also responded cooly, urging Japan to prioritize regional peace and stability and affirm its peaceful constitution. In Meng’s view, this points to the continued relevance of Japan’s history of wartime aggression and regional wariness about what Japan might do if it were to regain offensive military capabilities. Although Meng urges China to strengthen its dialogue with Japan and strengthen its regional diplomacy, Meng places the responsibility for deteriorating regional stability on Japan’s “dangerous behavior” and its “pro-American Cold War mentality” regarding China’s rise.

China–Southeast Asian Relations
In Guoji Guancha, 2023, no. 2, Liu Kaijuan and Zheng Xianwu assess the prospects for the construction of a Lancang–Mekong regional security community, in line with China’s foreign policy of building a “community with a shared future for mankind.” Liu and Zheng trace the origins of Lancang–Mekong regional cooperation to the immediate post-Second World War era. Initially, cooperation in the Lower Mekong (Thailand, Cambodia, Laos, and (South) Vietnam) was driven by external forces like the UN and the United States and focused on flood control and water resources development. In 1992, the Greater Mekong Subregion was established (adding China and Myanmar to the original four countries) to focus on economic cooperation. Although the six countries shared an interest in maintaining regional stability to promote development, their security cooperation was mainly based on the Sino–ASEAN framework and was not formally included within the Greater Mekong Subregion framework. This security cooperation was influenced by the “ASEAN way” and the “China way” (for example, the Five Principles of Peaceful Coexistence and the New Security Concept), in combination with foreign norms. Together, these norms and the six countries’ experience of working cooperatively lay the groundwork for the creation of Lancang–Mekong regional norms, such as resolving disagreements through dialogue and refraining from the use of force, that make the emergence of a security community more feasible.

In 2016, the six countries established the Lancang–Mekong Cooperation mechanism, which Liu and Zheng believe demonstrated the increased power of regional norms. Applying Amitav Acharya’s framework for evaluating the creation of a security community, Liu and Zheng assess the implementation of shared dispute settlement norms, collective action norms, and collective identity through the Lancang–Mekong Cooperation mechanism. Liu and Zheng argue that the six countries affirmed their commitment to the peaceful settlement of disputes within the cooperation mechanism, institutionalized through regular conferences and a commitment to consensus-based decision-making. This mechanism provides the platform for the six countries to resolve conflicts of interest that arise from nature (for example, heavy rains or droughts), human behavior (for example, US and Japanese intervention in the region), and history (for example, border and territorial disputes). Liu and Zheng argue that the Lancang–Mekong countries can strengthen security norms by coordinating to issue warnings about shared threats, strengthening mutual trust within the region, adopting a policy of “shelving disputes and jointly developing resources” regarding territorial disputes (a formulation that China has also attempted to use in the South China Sea), and through Chinese efforts to actively promote the creation of regional security norms.

At the same time, Liu and Zheng argue that the Lancang–Mekong Cooperation mechanism can promote collective action by standardizing the six countries’ relations with each other and with countries outside the region regarding water cooperation and other issue areas. For example, in 2017 the six countries established a Lancang–Mekong Water Resources Cooperation Joint Working Group and a Lancang–Mekong Environmental Cooperation Center. The six countries can improve their practice of “reciprocity” (for example, by recognizing how actions impact countries both upstream and downstream) and synthesize development and environmental protection norms to achieve sustainable development. Liu and Zheng also argue that the six Lancang–Mekong countries can work together to resist the negative influence of extra-regional powers (presumably the United States) and seek compatibilities between regional and US norms.

Finally, Liu and Zheng assert that the Lancang–Mekong Cooperation mechanism has led to efforts to promote multilateral security cooperation and a shared Lancang–Mekong identity. Four Lancang–Mekong countries (China, Laos, Myanmar, and Thailand) established a center to coordinate law enforcement and security cooperation in 2017. Liu and Zheng also argue that a “Lancang–Mekong consciousness” has emerged, which can be further encouraged by encouraging people in the region to view themselves as “drinking from the same river” and sharing closely linked fates. In each of these aspects, Liu and Zheng argue, the Lancang–Mekong Cooperation mechanism is predominately driven by the “China way” and the “ASEAN way,” rather than by the external norms that were more influential during earlier periods.

Liu and Zheng conclude that the construction of a Lancang–Mekong security community is still a work in progress. Nevertheless, they argue, regional cooperation to date provides a model of a more inclusive security community than that originally envisioned by Western theorists, which can be applied more broadly to achieve China’s stated goal of building a “human security community.” Furthermore, Liu and Zheng argue, the Lancang–Mekong region provides an example of how regions can achieve “coordinated norm symbiosis” rather than viewing different normative frameworks as zero-sum competitors. From this perspective, regional actors have the power to selectively adopt and adapt external norms (along the lines of Acharya’s “constitutive localization”) and seek compatibilities with extra-regional normative frameworks. Liu and Zheng’s analysis provides a framework for viewing China’s promotion of its norms as potentially complementary—and, certainly, as equally valid—to established global (Western) norms. By positioning China’s normative approach in this way, they believe that China can “gain a dominant position in the international norms competition.”

In Dangdai Yatai, 2023, no. 1, Wang Li’na evaluates the factors that contribute to the completion of Chinese infrastructure projects in Southeast Asia. Infrastructure cooperation has been a key aspect of Sino–Southeast Asian cooperation since China launched its “going out” strategy in 2000 and took on increased importance with the 2013 launch of the BRI. However, while some infrastructure projects have been completed successfully, others have failed because of local opposition. Wang argues that whether an infrastructure project is likely to succeed depends on the power and interests of various stakeholders.

Wang argues that infrastructure projects are complex and involve many stakeholders. Decisions are made by two groups of stakeholders: governments, which approve project proposals, develop guidelines for their execution, and oversee compliance, and companies (including investors, local partners, and contractors). Governments seek economic growth and development, while companies pursue profit. Local governments, social elites, international financial institutions, and domestic opposition parties take on a supervisory or auxiliary role. Local governments are charged with implementing the project and overseeing communication between the local community and the project planners. Social elites convey community demands and seek to protect established interests. International financial institutions pressure project managers to adopt international standards and best practices. Domestic opposition parties provide oversight on the ruling party. Finally, there are many other potential stakeholders, including the local population (which is directly impacted by the project), NGOs (which may promote community demands or values such as environmental protection), and the media (which provides oversight and exposes non-compliance). While governments and enterprises make project decisions, whether the project progresses smoothly will depend on their relationship with the other stakeholders.

When key stakeholders with decision-making authority have a lot of influence over other stakeholders and support cooperation on an infrastructure project, the project is more likely to succeed. By contrast, when there is a lack of powerful stakeholders who can influence others to cooperate, the project is less likely to succeed. A second key factor that determines project success relates to the degree of procedural justice (for example, accountability and transparency) and whether the costs and the benefits of the project are distributed fairly among parties. Successful cooperation is more likely to occur when there are higher levels of procedural and distributive justice. Taken together, Wang predicts that infrastructure cooperation is most effective when central decision-makers are powerful and costs and benefits are distributed fairly, highly effective when central decision-makers are powerful but costs and benefits are not distributed fairly, less effective when central decision-makers are weak but costs and benefits are distributed fairly, and least effective when central decision-makers are weak and costs and benefits are not distributed fairly.

Using this framework, Wang evaluates four Sino–Southeast Asian infrastructure projects. The most successful example is the China–Laos railway, the Lao portion of which opened in 2021.  Wang argues that despite some disagreements among the parties, the project was successfully completed because of the high degree of power among central decision-makers and the fair distribution of costs and benefits. Laos has a highly centralized government with a single political party; its Ministry of Planning and Investment had the authority to approve and oversee the project. Local autonomy is limited, and civil society is weak. Consequently, the central government could push through the project. Furthermore, the China–Laos railway benefits all stakeholders because they have a shared interest in economic development. As a landlocked country, Laos’ limited transportation infrastructure has limited its economic growth and tourism. Wang also asserts that the project developers successfully balanced construction with environmental protection. Wang is dismissive of claims that Lao villagers were harmed when their land was appropriated for the construction project, arguing that villagers have been compensated (and attributing any failures in the process to the Lao government, rather than Chinese project planners). Consequently, Wang argues that the China–Laos railway is a strong example of a successful BRI project.

Wang argues that the Jakarta–Bandung High-Speed Railway is an example of a relatively successful infrastructure project. The project was launched in 2016 but stalled over disputes related to land acquisition. Nevertheless, Wang asserts that the overall construction process has been “relatively smooth”; the railway is now expected to open for commercial use in early 2024. Wang attributes this success to a highly centralized decision-making structure. Both China and Indonesia have prioritized the construction of this railroad. Although some Indonesian religious, political, and business groups have raised concerns, the economic benefits of the railway have limited the sway of these perspectives. Indonesian media tend to cite official sources and have not raised many questions about the project. The biggest concerns have concerned compensation for land, information transparency, and public participation. Construction began before the parties had submitted all the proper documentation or obtained all the necessary construction permits. Questions were also raised about the decision to award the contract to China, rather than Japan. Others have expressed concerns that the environmental impact review process was shortened, limiting opportunities for public comment. Despite these controversies, however, Wang rates this project as highly effective.

By contrast, Wang contends that the China–Thailand high-speed railway has been less successful because of the lack of a centralized decision-making power structure. China and Thailand signed a memorandum of understanding in 2014 and construction is underway, but the project has been delayed. Wang attributes the weak centralization of the decision-making process to Thailand’s “fragmentation,” both in terms of its efforts to balance its relations with various foreign countries and its domestic political structure and populist style of politics. This has made it difficult for the government to push forward the project. Although the Thai decision-making process ensures a high degree of domestic accountability, there has often been a lack of transparency and opportunity for public participation. Nevertheless, the benefits of the project are relatively fairly distributed and meet local needs, without substantial environmental harm. Taken together, these factors account for the slow pace of this project.

Finally, Wang assesses the reasons for the failure to complete the Myitsone Dam in Myanmar, which has been paused since 2011. Wang argues that the decision-making structure shifted from strong to weak centrality when Myanmar’s military junta lost power. Under the Thein Sein government, civil society, NGOs, the media, opposition parties, and foreign countries played more of a role in advocating against the project. The “Save the Irrawaddy” movement, an environmental campaign that brought together the public and elites across the country, successfully mobilized opposition to the dam. Furthermore, the project suffered from a lack of accountability and transparency. Myanmar lacked an environmental protection department so there was no government bureaucracy to oversee an environmental impact assessment. Concerns about the plan to export most of the electricity produced to China spurred demands to see the contract. Other disputes arose over whether the dam would benefit Myanmar’s central government at the expense of the state of Kachin (where the dam would be located), whether Myanmar would benefit as much as China, and whether the dam would harm local villagers without offering them any benefit, since the power generated would be mostly exported.

Wang concludes that this framework provides useful lessons for how to promote successful infrastructure projects in Southeast Asia and other regions, highlighting that competition to provide these projects is a key component of the Sino–US great power rivalry. First, China should be attentive to gaining the support of auxiliary and potential stakeholders, such as elites, NGOs, and the media, which play a key role in determining whether a project moves forward smoothly. Second, China should emphasize the fair distribution of benefits among all stakeholders, including not just material benefits but also transparency and accountability in the decision-making process. Notably, Wang finds that projects proceed the most smoothly when there is a highly centralized government decision-making process that allows the government to push the project forward—a finding that reflects China’s own domestic experience with infrastructure construction. Furthermore, Wang’s ultimate definition of “effectiveness” is the completion of a project without substantial delays—though others might judge the success of a project not just by how quickly a project is completed, but also by the benefits it delivers to the population of the host country and to local residents. In this sense, delays to a project that result in an outcome that better meets the needs of the host community might reflect more “success” than a project that was forced through and finished according to the original schedule.