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Download this week’s newsletter as a PDF here: CPW No. 34
Dear friends and colleagues,
Officials have been preoccupied with issues of politics, governance and Party-building as they prepared for the Fourth Plenum. After months of focusing primarily on domestic concerns, attention this week turned to China’s relations with the wider world as leaders from around the globe descended on Beijing for the Asia-Pacific Economic Cooperation (APEC) Summit.
Most eyes (and media attention) will focus on relations with the United States and Japan. The three countries are the three largest economies in the world and the dynamics between them are arguably the most important determinants of peace and prosperity in the world.
For China, relations with both countries have been strained (an understatement in the case of Japan) since Xi took power two years ago. Obama’s visit looks unlikely to change the bilateral dynamic; for the foreseeable future the US and China will continue to enhance economic cooperation while maintaining a healthy dose of strategic distrust.
Sino-Japanese relations look more promising. A meeting between Chinese and Japanese foreign ministers on Friday looks likely to pave the way for a Xi-Abe meeting, or at least a handshake. Amazingly, this would be the first contact between they both came to power almost two years ago.
More Asia less Pacific
While much of the Western press will focus on the three Pacific powers, China seems to be going out of its way to show everybody that its focus is on its neighbors to the south and west. It is no coincidence that as APEC activities had already begun in Beijing, Xi hosted a “connectivity dialogue” with leaders from seven non-APEC countries. The focus was on strengthening trade and investment ties across Eurasia. The dialogue was not just a bunch of empty talk; China announced it is creating a USD 40 billion Silk Road Fund to finance infrastructure in the region.
This connectivity dialogue is part of China’s larger effort to reshape the regional order to give China more influence. Xi’s two major international initiatives, the Silk Road Economic Belt and the 21st Century Maritime Silk Road, conspicuously (albeit logically) leave no place for its rivals the United States and Japan. Ditto the new China-led Asian Infrastructure Investment Bank (AIIB) that looks to be a direct competitor to the Asian Development Bank dominated by the US and Japan.
The connectivity dialogue was not the only signal of China’s westward orientation sent this week. Monday’s meeting of the Central Finance and Economics Leading Small Group focused on the two Silk Road initiatives. Then on Wednesday it was announced that a new Central Asia Regional Economic Cooperation (CAREC) Institute will be headquartered in Urumqi, China. CAREC, it should be noted, is an ADB-led initiative.
The CAREC Institute is indicative of the way in which China will attempt to maximize it influence in existing institutions even while it tries to set up alternatives to them. China consistently tries to pragmatically pursue goals through multiple channels. Likewise China is using APEC to push its own trade agenda, and help in its domestic anti-corruption campaign.
From a Chinese perspective, APEC is ultimately deeply flawed, not least because it includes Taiwan and Hong Kong as members separate from China. China will not abandon the institution, but it will seek to promote other multilateral arrangements that it sees as more conducive to advancing its interests.
China Politics Weekly aims to keep business leaders, investors, diplomats, scholars and other China hands up to date on important trends in China. It is produced by Trey McArver, a London-based consultant providing advice and intelligence to firms and investors engaged in China and the region.
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