Daniel Venable

Professor Reynolds

Intelligence Community

April 9th 2018

Chinese Economic and Market Expansion

To complement its territorial, maritime, and military expansions, the People’s Republic of China has
recently begun utilizing its massive and growing economy to aggressively pursue its own national
interests. This is one of the many strategies that were suggested by Qiao Liang and Wang Xiangsui, in
their pointed book Unrestricted Warfare, when they stated that “even a quasi-world power like China
already has the power to jolt the world economy just by changing its own economic policies (195).”
Their advice has certainly been heeded, and these aggressive new policies can be seen manifested in
three key areas: the belt and road initiative, development finance, and the utilization of economic
warfare in disputes with rivals.

The “Belt and Road” initiative (BRI), was formally announced and officially launched by PRC President Xi
Jinping in November of 2013 (Jinchen). This creatively named policy represents an unprecedented,
multi-pronged push outward by the PRC. Its grand scope could include up to 70 countries, 2/3 of the
world’s population, and investments from the Chinese government up to $4 trillion (Hillman). This
massive project has now made significant progress, but it is still far from being completed.

Strategically, BRI consists of two key implementations. These are the Silk Road Economic Belt, which
encompasses the interior of the eurasian continent, and the 21st Century Maritime Silk Road, which
brings together the Persian Gulf, Mediterranean, Indian Ocean, and Pacific Islands. These names allude
to Marco Polo’s legendary Silk Road, which brought Chinese goods en masse to European markets for
the first time in history. The respective “Belt” and “Road” seek to have an even more powerful economic
impact than their famed predecessor. The eventual goal of the BRI is an unbroken web of eurasian
trade, with China at its center (Jinchen).

To be establish these routes, the PRC is investing in infrastructure, including: highways, railways, roads,
bridges, pipelines, and seaports (Jinchen). Furthermore, the PRC claims that the BRI will benefit the
entire region by encouraging “open discussion” for all countries involved through economic provisions,
financing, trade agreements, and foreign policy cooperation (Jinchen).

In this sense, BRI could be viewed through a noble lenses. The PRC is partnering with developing nations
across the continent building infrastructure, giving loans, and opening pathways for trade. These
benefits, in the region, are already tangible, and the promises of the future are even more spectacular.
However, nothing in life is free. As the BRI flourishes, these symbiotic relationships, will ultimately begin
conforming to the interests of the PRC, and a complete success of the BRI could virtually monopolize
eurasian resources for Chinese interests. This would thrust China into a “superpower” status alongside
the United States (Hillman).
The PRC is pushing its motives, including the BRI, with strategic investments into local economies. By
giving loans to foreign governments, purchasing foreign debt (including our own), and financing projects
in developing countries, the PRC expects to return tenfold on their investments (Perkowski).
Furthermore, as an export economy with a GDP second only to the United States, they have plenty of
capital to loan out for such projects (CIA).

The PRC channels its significant outward cash flow through “policy banks.” As the name implies, these
institutions are controlled by the state and exist to strategically advance Chinese interests (Perkowski).
The most prominent players are the China Development Bank (CDB) and the China Export Import Bank
(C-EXIM). Together, these two institutions now hold more assets than all other western development
banks combined, including the World Bank (Kamal).

The CDB and C-EXIM are funded by the growing Chinese economy and have been financing development
projects in Africa and Latin America since the early 2000s. Their assets now total over 1.8 trillion, and
the state ownership of these banks ensures that all of their debt is backed-up and guaranteed by the
Chinese government (Kamal). This allows them to grant loans at much lower interest rates and for
longer periods of time than any other development banks, incentivizing higher rates of borrowing.
Through these nations and projects financed by their “policy banks,” the PRC is strategically
maneuvering itself into a position of guaranteed access to the resources that its exploding economy will
demand in the near and distant future (Kamal).

Not all economic actions taken by the PRC can be explained away under the guise of development or
foreign investment. Holding true to the principles outlined in Unrestricted Warfare, China has not
hesitated to use its economic influence as an offensive weapon against its regional rivals. Several
examples of this behavior in the Philippines and Japan demonstrate how effective this type of policy can
be.

In the Philippines, China inflicted major economic damage by temporarily blocking banana imports in
2012. This policy followed a non-violent incident between Chinese fishermen and a Filipino warship on
the hotly contested Scarborough Shoal, a rich fishing ground well within the Exclusive Economic Zone
(EEZ) of the Philippines but long claimed by China. The sudden restrictions caused tons of perishable
fruit to rot on the loading docks and at the farms where they had nowhere to go. Also around this time,
an unexplained travel advisory against the Philippines was released by Beijing to Chinese citizens,
causing a sudden and unexpected decrease in Chinese tourism. Although Chinese officials denied any
correlation to these events and broader economic policy, their actions constituted costly blows to the
island nation’s second largest agricultural export and their struggling tourism industry (Higgins).

A similar scenario also took place in Japan. In 2010, the Japanese Coast Guard detained a Chinese
trawler captain, who was caught fishing in contested waters within Japan’s EEZ. The PRC responded to
the situation by blocking all exports of rare earth minerals to Japan. China controls the production of up
to 93% of rare earth minerals in the world market, and he minerals in question were critical to the
manufacturing of hybrid cars, wind turbines, and other technologies. The PRC’s willingness to use access
to globally demanded resources as a flagrant bargaining chip in a minor dispute has caused widespread
concern (Bradsher).
References

China goes global with development banks. (2016, April 14). Retrieved March 21, 2018, from
http://www.brettonwoodsproject.org/2016/04/20508/

Bradsher, K. (2010, September 23). Amid Tension, China Blocks Vital Exports to Japan. Retrieved
March 21, 2018, from http://www.nytimes.com/2010/09/23/business/global/23rare.html?_r=0

China's Belt and Road Initiative: Five Years Later. (2018, March 20). Retrieved March 21, 2018, from
https://www.csis.org/analysis/chinas-belt-and-road-initiative-five-years-later-0

Higgins, A. (2012, June 10). In Philippines, banana growers feel effect of South China Sea dispute.
Retrieved March 21, 2018, from https://www.washingtonpost.com/world/asia_pacific/in-philippines-
banana-growers-feel-effect-of-south-china-sea-
dispute/2012/06/10/gJQA47WVTV_story.html?utm_term=.f6a3e9528485

Jinchen, T. (n.d.). 'One Belt and One Road': Connecting China and the world. Retrieved March 21, 2018,
from https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/one-belt-
and-one-road-connecting-china-and-the-world

Liang, Q., & Xiangsui, W. (1999). Unrestricted Warfare. Beijing: PLA Literature and Arts Publishing House
Arts.

Perkowski, J. (2012, July 27). Chinas Economic Expansionism. Retrieved March 21, 2018, from
https://www.forbes.com/sites/jackperkowski/2011/09/23/chinas-economic-expansionism/#7854a

The World Factbook: CHINA. (2018, March 14). Retrieved March 21, 2018, from
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.htm