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China is back. Nearly two centuries after it lost its traditional place at the center of Asian affairs, Beijing has begun giving shape and substance to its renewed leadership on the regional stage.
This was on full display at the recently concluded meeting of the Asia-Pacific Economic Cooperation (APEC) forum, a grouping of 21 economies from both sides of the Pacific. As this year’s host, Beijing not only rolled out the red carpet for leaders from the rest of the region, it also announced a series of major initiatives designed to place China at the center of Asia’s economic future.
Chinese President Xi Jinping articulated his vision for an “Asia-Pacific dream” of shared development and prosperity, notable less for its inflated rhetoric than the concrete proposals and resources China is putting forward to realize it. Backed by promises of nearly $100 billion in overseas loans and investments, Beijing used this year’s APEC meeting to establish a new multilateral infrastructure lending bank, launch a “Silk Road Fund” to connect China with its westward neighbors, and advance progress toward a region-wide Free Trade Area of the Asia-Pacific (FTAAP). In doing so, Xi apprised his visitors that, “China has the capability and the will to provide more public goods to the Asia-Pacific and the whole world.”
China’s renewed regional activism is coming more rapidly than anyone expected. Having gone decades without seeing another power quite so capable and confident, Washington will have to adjust accordingly, following four principles.
First, economics is king in Asia and will have to feature front and center in U.S. policy in the years to come. Although the region’s military competitions and territorial disputes are all too real, the fact remains that leadership and influence will flow from the wallet, not the gun. For that reason, the Obama administration is right to be striving hard to conclude negotiations on the Trans-Pacific Partnership, an agreement among 12 countries that would cement high standards in regional trade. To do so, the president will have to work closely with the new Republican Congress to pass Trade Promotion Authority.
But more broadly, U.S. trade policy and economic statecraft can no longer be the sole purview of the U.S. trade representative, or even the Treasury Department. The president, the national security advisor, and the secretary of state should consider economics, trade, investment and development core elements of U.S. foreign policy. That will require the United States to be entrepreneurial in putting forward meaningful initiatives that serve the region’s needs and play to the United States’ strengths, in areas such as clean energy, finance, and higher education. Playing defense against China’s economic activism is a losing strategy.
Second, Washington needs to take more seriously its own pledge—repeated by U.S. President Barack Obama on his recent trip to Asia—that it welcomes the rise of China and is willing to make room at the table for Beijing. Moving from a G-7 to a G-20 world was a significant step in the right direction. But the U.S. Congress’ unwillingness to pass quota reforms at the International Monetary Fund, which would elevate China’s voting share to a level more in line with its economic power, has reinforced perceptions in Beijing that the existing system is stacked against it. Who can blame China for considering alternative or competing institutions if its voice is unfairly blocked in existing ones?
Third, Washington should not be shy about pushing back on Chinese initiatives when they run counter to broadly accepted international practices. But it should do so in ways that are transparent and principles-based. This should be a key takeaway from China’s recent efforts to establish a new Asian Infrastructure Investment Bank (AIIB), which Washington has refused to join until Beijing provides more clarity on how the bank will uphold basic environmental, procurement, and other standards.
Although governments in Australia, South Korea, and across Europe all had similar apprehensions about the bank, U.S. concerns were never expressed with sufficient clarity or volume, leading to exaggerated stories of Washington’s backroom lobbying and knee-jerk obstructionism to stymie China’s efforts. Next time, leading U.S. officials should be willing to go on the record about appropriate governance and lending standards.
Finally, the United States should be willing to work with Beijing to shape Chinese initiatives. Although leaders in Beijing are loath to admit it, they have a lot of learning to do. In fact, despite the appearance of near limitless Chinese determination and money, the AIIB and the FTAAP fell far short of Beijing’s original ambitions. Both were substantially rolled back as it became clear that they would a butt up against prevailing norms—norms that have served China’s interests well over the past 30 years of rapid growth.
In that sense, both the United States and China should walk away a little bit humbled and a little smarter about how to pursue their interests in the twenty-first century. Washington will have to learn to live with Chinese power and influence, and Beijing should be careful not to throw the baby out with the bathwater as it tries to reshape the global economic order.