China: Asia's New Imperial Headache

Asia's trouble with China and China's trouble with Asia are both several centuries old.

In 1793, Britain's King George III sent his emissary to Emperor Ch'ien Lang of China to seek his hand in trade. "Your curios fail to impress me... China does not need such trivia from abroad." wrote the emperor in a very terse message sent through the British envoy George Macartney, which was signed off with the customary Chinese imperial signature "Tremble and Obey".

Much water has flown under the bridge in the last 231 years. But several factors force President Xi to dip his hands into Emperor's Lang's diplomatic toolbox for words and deeds to reign over his ambitious neighbours.

With 14 land neighbours and six more maritime ones, China probably has the largest number of neighbours in the world (Russia also has 14 neighbours). With US$ 2 trillion in mutual trade, China's neighbourhood is one of the world's most active trade zones. Yet most of the balance of trade is loaded in favour of China. Cumulatively the Chinese neighbourhood imports more from China and exports more to the West.

China's foreign policy is a mix of arm twisting, land grabbing, enticing with infrastructure loans, bribes for leaders and some more. Generous loans from China have helped smaller countries in the neighbourhood. One single railway line from China to Laos increased the GDP of the country by 24%. Other neighbours have not been so lucky. Most of China’s development assistance comes with a lot of baggage - overpriced Chinese construction services, plenty of Chinese labour and expensive debt. Sri Lanka dipped into bankruptcy. China's 64 billion port and road project in Gwadar with allied infrastructure pushed Pakistan to its 24th IMF programme. Frequent skirmishes mark the long border with India and several others.

One major factor that distinguishes China is that the country has kept its approximately 22,500 kilometres of borders with its neighbours unsettled. It has border disputes with all its neighbours except Vietnam. China’s bid to grab land from the country ended in a bitter battle in which China saw significant losses. In other cases, the battles are still raging. Countries which embark on military alliances with the West will lose favour in trade with China.

Containing China’s expansionist policies has been a challenge for China’s neighbours. It is no mean task. China is facing several challenges internally. An ageing population, increasing labour costs, waning productivity, growing disparities, slowing economy, easing real estate markets, winding stock markets… all indicators are pointing south in the medium term for the world’s second largest economy. Most of it is the overhang of an economy that has run its pace for two decades, just waiting to catch its breath. But in a totalitarian state, you never know when a civil unrest could brew. Both the government and its people are increasingly afraid of each other.

Knowing China and what other insecure deep states would do in a challenging domestic environment, its neighbours have reason to worry that China could charge any moment now. The state is playing up its external threats to appease its domestic audience. It is taking up aggressive postures against India, Taiwan and Japan. It is brow beating little Philippines. Even South Korea is in the radar for military action.

Taking such a posture is tough for China too. It lacks the resources to fight across its entire border. Its army is designed like the Russians into small integrated units for quick strategic interventions. Each unit is a combination of infantry, artillery, tanks and a supporting air formation. These units can penetrate enemy territory, but cannot hold on to them. Their equipment is also mostly based on Soviet-origin technology. The Chinese army has no real combat experience and depends on PR to build its case.

Geography also plays spoiling sport. 96% of China’s population is spread across its Eastern coastal belt. The vast expanse of land between India and Mongolia host just 4% of China’s population. Hence countries like India cannot engage in a meaningful war with China until its army can pierce deep into Chinese territory, and spread itself too thin.

The other option is to create coalitions with interoperable army, navy and air force to counter Chinese threat across its entire theatre of influence. Such a strategy is both expensive and tough to execute. But it would be easier to neutralise any Chinese threat with a coalition of like-minded countries.  

Whatever is to be done needs to be done quickly. The Chinese economy is on a steep slope. As interest rate hikes in West hamper purchasing capacity and lower demand for Chinese goods, its economy may roll downhill as well. De-globalization and nearshoring of manufacturing by the West are other persistent threats. Emperor Xi has a tough job at hand. His over-aggressive foreign policy means that he has lesser friends to write to.

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