China’s New Year: Three red capes the Ox needs to look out for
There is no shortage of bipartisan support for being hawkish on China, and so while Beijing might have hoped that the trade war started by Donald Trump may come to an end, early indications are that the tariffs will be maintained by Joe Biden as well
Merely two months after the Gregorian New Year, celebrated worldwide, nearly two billion people in East Asia celebrate the Lunar New Year, also known as the Chinese New Year. Traditionally, every Lunar Year is assigned with one of the 12 Chinese zodiac signs, ranging from dragons to rats. This year, it is the Year of the Ox.
The tragic 2020 (which also happened to be the ominous year of the rat) saw a massive economic downturn affecting almost every country, with one notable exception - China. It was the only major economy to finish the year with a positive GDP growth, largely thanks to a strong fourth quarter recovery. As we have just entered the Year of the Ox, let's have a look at three things to focus on as China continues to grow.
China looks inwards for post-Covid-19 growth:
First mentioned by President Xi Jinping last May, it seems that China will be leaning towards a policy of "Dual Circulation" in 2021. It means the focus will be on "internal circulation", which includes the domestic cycle of production, distribution, and consumption. External circulation - meaning trade outside its borders - will be complementing that. The ripples of this policy might potentially be felt far and wide.
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The most notable of them could be China's flagship Belt and Road Initiative (BRI). Dwindling enthusiasm in BRI, which started in the pre-covid times, snowballed into a massive 54% decrease in investment between 2019 and 2020. There has also been a shift in the sector in which China is investing. From focusing primarily on transportation infrastructures, it now prioritises renewable energy projects. Over 50% of BRI investments in 2020 were related to renewable energy.
But looking forward, there is likely to be a return to transport infrastructure, particularly in South East Asia, in order to maximise the recently signed Regional Comprehensive Economic Partnership (RCEP). China is more interested in RCEP as it brings greater synergy between the East Asian countries while ensuring its own place at the center of the Asian economies. Thus the first thing to keep an eye on is how much China is willing to invest outside of its own borders and what effect this will have on its ability to influence other countries.
Sino-Indian competition continues: Super Dams and Vaccines
The second key thing to watch out for regarding Chinese foreign policy in 2021 is its relationship with India. While 2020 witnessed the closest encounter to a full-blown war between the Asian giants, 2021 has begun in a more harmonious fashion. Both sides pulled troops out of the contentious Pangong Lake on 19th February. The immediate impact of this is a cooling of the simmering tensions in the icy Himalayas, but behind the scenes, all is not well.
China's recent announcement of building the world's largest super dam on the Brahmaputra River has immediately caused some alarm in New Delhi. India fears that China may 'weaponize' the advantages from the dam in future confrontations, though China has denied any such intentions. Unfortunately, the precedence set by China in unfairly dealing with South-East Asia's Mekong River means that a degree of scepticism remains. India has responded by announcing its own plans for a dam on the river, which may only serve to heighten tensions and worsen the water security of the region as a whole.
The second thing to keep an eye on for relations between China and India is vaccine diplomacy. While we have considered RCEP and how China is using trade to foster better relations in Asia, vaccines have moved the Sino-India struggle to a new frontier. India is home to the world's largest producer of vaccines, the Serum Institute of India, and is manufacturing the Oxford-AstraZeneca vaccine. India has already been granting enormous amounts of vaccines to its immediate neighbours (save for Pakistan), and has agreements with multiple countries in multiple regions, on both humanitarian and commercial bases.
At the same time, China has been manufacturing its own vaccines, with the Sinopharm and Sinovax vaccines being used in several countries in South East Asia and Eastern Europe, cementing China's role in combating the pandemic as well. Actions of both these countries in fulfilling their commitments may enhance their reputations and power in the region and beyond.
The third area to keep an eye on will be India's engagement with The Quadrilateral Security Dialogue, known informally as The Quad. This dialogue, made up of Australia, India, Japan and the USA, aims to ensure security in the South China Sea and the broader Indo-Pacific Ocean areas. This has been seen as a direct challenge to China's actions in the South China Sea, and China has not responded well, calling the Quad an 'exclusive clique' which will be a precursor to an Asian NATO. How this develops further down the road will absolutely be something to keep an eye on.
Joe Biden - New Administration, New Challenges:
While the coronavirus and tensions with India were important issues for China in 2020, the U.S. presidential election was perhaps the most keenly followed event in Beijing. One of the key issues in the election was which of the two candidates would be softer on China.
Even as Donald Trump lost the election, his Secretary of State, Mike Pompeo, fired off a couple of closing shots to China. One was to remove internal restrictions in dealing with Taiwanese officials and the second, and perhaps more prominent one, was to call China's actions against Uighur Muslim community in Xinjian a genocide.
While China might have hoped for a more muted response from the Biden administration, early indicators suggest that Biden is going to be tough on China as well, with his Secretary of State Anthony Blinken agreeing with Sec Pompeo's assessment of Xinjiang. This has brought a furious response from China.
Joe Biden himself has suggested that a more multilateral approach is required to deal with China, and the Quad is certainly one of the numerous multilateral institutions that the Biden Administration has pledged to engage with.
There is no shortage of bipartisan support for being hawkish on China, and so while Beijing might have hoped that the trade war started by Donald Trump may come to an end, early indications are that the tariffs will be maintained by Joe Biden as well. Appointing Jake Sullivan, a noted China-hawk, as National Security Advisor has sent a clear signal that Biden has no intention of being soft, and how China's engagement with the USA evolves as a result this new administration will absolutely be something to look out for.
What does all of this mean for Bangladesh?
A global decrease in foreign investment by China will certainly have an impact on Bangladesh. China displaced the United States as Bangladesh's top investor in 2018 and has maintained this position with multiple rounds of investment in the infrastructure mega projects. In total, China has made commitments of US$40 billion to Bangladesh and offered duty-free market access for 97% of Bangladeshi products in 2020.
But the question is - with the aforementioned policy of dual circulation, will Bangladeshi products be able to find a market in China, which is set to be flooded with its own products?
Another thing to keep in mind is - the geopolitical implication of being seen as close to China. Covid-19 has not been kind to China in terms of its international reputation, and trust in the Middle Kingdom is at quite a low, especially with countries increasingly calling out China for its treatment of Uighur Muslims as well as its actions in Hong Kong and towards Taiwan.
Against such backdrop, reliance on Beijing may be seen poorly by many in the region, primarily India. What India lacks in economic incentives, it can offer in institutional certainty as the world's largest democracy.
If the USA is looking to build an alliance of democracies, Bangladesh must be careful to not put all of its eggs into either one basket at this point in time, opting instead for a policy of balancing between the two poles that are engaging in what is shaping up to be the geopolitical battle of the 21st century.
The coronavirus, the skirmishes with India and the election of Joe Biden may have been some of the top stories for China in 2020, but how China continues to deal with these challenges will continue to be stories of keen interest in the Year of the Ox.
Sandeep Chulani is a YPF fellow of Foreign Policy and a PhD candidate at the City University of Hong Kong, specialized in hydro-politics.
Shah Minhaz Chowdhury is a researcher at YPF and a final year student of Peace and Conflict Studies at the University of Dhaka.
This is the 3rd policy column under the Youth Policy Forum (YPF)-TBS partnership.
