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Ambitious China goes land roving

John Lee

It is easy to forget that for thousands of years, China was a country with a continental economic, trade and martial outlook, before it emerged as one of the great maritime trading nations over the past three decades.

Even the legend of Admiral Zheng He (the great admiral, diplomat and explorer from the early 1400s, who allegedly sailed as far as the Middle East and East Africa in several voyages over thirty years) cannot change the reality that China was overwhelmingly a ‘Middle Kingdom’ in the Eurasian landmass, not a great maritime one as modern-day Chinese propaganda chiefs like to claim.

As a comment about history, the opening paragraph might be interesting to some readers. But as a guide to the future of strategic and economic relations to our north and northwest, continental China is far from dead and buried. In fact, the two sides to modern China—a continental and maritime one—will continue to evolve and perhaps even be in competition.

As an island nation, we tend to only focus on the maritime part of strategic and economic relations. But if China’s rise is really going to shape our region and the world over this century—and there is a long way to go if this happens if at all—then we ought to understand that the rise of continental China will remain as pertinent as the recent rise of the maritime version.

As an example of how Australia is only focused on the vertical plane of Asia from the east coast of China and Japan, down to the Philippines, Malaysia and Indonesia, consider the announcement over the weekend that China and India will move ahead with preparation for the BCIM (Bangladesh, China, India-Myanmar) economic corridor, following a visit to Beijing from Indian Prime Minister Manmohan Singh.

The ‘what’, you may ask? That’s the point. The announcement was hardly sighted in the Australian press.

This is despite the Chinese proclaiming that the BCIM corridor could “change the geo-political map in Asia and the world”.

Maybe China overstated the case just a touch. But continental developments in the Asian side of the Eurasian landmass will not be insignificant, and it will have strategic and economic consequences for the Asia-Pacific.

First of all, the BCIM economic corridor includes four countries with a combined population of over 2.8 billion people—almost 40 per cent of the world’s population. The combined GDPs of the four countries based on 2012 figures is $US10.24 trillion—less on proportional terms than global population size but still almost 15 per cent of the world’s GDP. Importantly, all these countries have the chance to grow at rapid rates of 5-8 per cent over the next couple of decades (even if this author is sceptical that China is capable of doing so).

Currently, the total trade volume of these four countries is $US4.74 trillion.

What does the Sino-Indian announcement about renewed interest in the BCIM economic corridor involve? It will include roads, railways, and other infrastructure connecting the four BCIM countries. They have revived a February 2012 plan to develop a 2,800-kilometre highway from Kolkata in India’s east, through Dhaka, Sylhet, Imphal, Moreh, Tamu, Mandalay, Museto, and ending in Yunnan province in China’s south.

Once the super-highway is in place, China has proposed setting up trading entrepots and industrial zones along it, complete with synchronised regulatory and taxation regimes. Importantly, Beijing appears to be warming to the idea of funding much of the development since it is the only member of the group capable of doing so. Despite much of the commentary about India’s ‘Look East’ policy being about maritime Southeast Asia, the policy is as much about the BCIM continental economic corridor as it is about accessing ports in Thailand, Malaysia, Indonesia, the Philippines, Cambodia or Vietnam. Reaching the potentially vast Chinese inland markets only through these ports does not make sense for New Delhi when it can take a much shorter land-based route to southern China, which is still largely out of bounds for more competitive advanced economy firms.

Is this revival of the south-west part of the ancient ‘silk road’ all a pipedream? Well, it is already happening between Myanmar and China, despite the former trying to welcome in Western firms in order to diversify its economy away from mineral and energy resources, and decrease reliance on Chinese SOEs.

China has long been pushing a framework of policies geared towards the so-called Greater Mekong Sub-Region, which encompasses Yunnan Province, Myanmar, Cambodia, Laos, Vietnam and Thailand. The Guangxi Zhuang autonomous region formally joined the GMS in 2005.

For China, the GMS is a critical component of the country’s national economic strategy. In addition to the desire for a continental trading route that connects southern China with the mainland of south-east Asia and south Asia (bypassing maritime routes through the South China Sea and the Malacca Straits), economic integration and growing prosperity in GMS and BCIM regions are seen as essential for the development of China’s southern provinces.

Bear in mind that Yunnan Province and Guangxi autonomous region are the second and fourth poorest provinces on a per capita basis in China respectively. Given that officials rely heavily on the prospect of growing inland zones of prosperity to fuel future economic prospects of these land-locked areas, it is not surprising that Yunnan Province with a population of 45 million (and to a lesser extent, Guangxi autonomous region with a population of over 50 million) has an immense interest and energy in driving Chinese economic policy towards the GMS and BCIM regions.

Over the past decade, and since Myanmar’s ostracism by the West after the military’s crackdown against protesters in 1988, China has spent billions building roads, rail and other infrastructure to support border commerce between the two countries.

While cross-border trade between China and Myanmar constitutes less than 1 per cent of overall Chinese trade with all countries, trade with Myanmar made up more than three quarters of Yunnan’s total border trade and over 12 per cent of its annual foreign trade in 2010. Myanmar is Yunnan’s largest export market, its second-largest import market, and an important hub for Yunnan businesses looking to expand into the rest of south-east and south Asia.

True, the fact that China has done relatively less to help develop the grassroots economy of Myanmar says much about the failure and limitations of the Chinese approach to economic statecraft and development vis-à-vis its neighbours. But Beijing’s determination to drive the creation of inland zones of commerce, trade and prosperity—with China as the dominant hub and in areas largely out of reach of firms from maritime Asia—is real, formidable and enduring.

This has strategic considerations which are also largely ignored in Australia. The major maritime countries are all overtly or subtly balancing against China: Japan, the Philippines, Vietnam, Malaysia, Indonesia, Singapore to name a few.

But the continental countries—despite remaining wary of China as a ‘big brother’—view the BCIM and GMS regions as indispensable to their economic futures. Hence, Cambodia, Laos, Bangladesh and Nepal can never truly escape China’s economic pull. Even Thailand will likely keep a strategic equidistance between China and the US, despite being a formal treaty ally of the United States.

Notwithstanding the emerging maritime competition between India and China in the Indian Ocean, New Delhi will need the BCIM concept to work—meaning it cannot allow relations with Beijing to significantly worsen. And despite the early signs of the reforms in Myanmar, China is still well placed to remain that country’s indispensable economic (and strategic) partner.

This could be the future shape of Asia that is worth taking seriously. China never really being able to dominate maritime Asian in an economic or strategic sense, but (re)emerging as the dominant continental economic and strategic power in the Asian part of Eurasia.

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