The “China Solution”: Beijing Aims for Global Leadership

Photo: AP/Michel Euler

U.S. President Donald Trump marked his 100th day in office with an executive order calling for a review of U.S. trade deals, as well as its membership in the World Trade Organization. The order follows statements earlier in the week threatening to terminate or renegotiate NAFTA and the U.S. free trade agreement with South Korea and is Trump’s latest shot against global free trade.

While Trump’s “America First” policies and anti-free trade positions have sent a message to the rest of the world that it is his way or the highway, Chinese President Xi Jinping has offered a more measured and inclusive message for the world. Speaking at the World Economic Forum in Davos, Switzerland, in January Xi said, “Whether you like it or not, the global economy is the big ocean you cannot escape from,” and, “We must remain committed to free trade and investment.”

Xi’s statements and Beijing’s aspirations for a greater global leadership role come with a new blueprint for other countries to follow: the “China Solution.”

The China Solution is Beijing’s latest buzzword describing its continued development aspirations. Following the earlier “China Model” and “China Dream,” the China Solution encapsulates a message for a global, rather than domestic, audience. Xi introduced the term while hosting the G20 conference in Hangzhou last year, saying, “It supports the common development of all countries, not just China’s own sphere of influence. It is meant to build not China’s own backyard garden, but a garden shared by all countries.”

In an article for the Lowy Interpreter, David Kelly, Research Director at Beijing-based strategic advisory firm China Policy, described Xi’s new phrase as China’s way of “addressing what it sees as global threats — rising protectionism, wealth gaps, environmental damage and unregulated cyberspace” that “stakes Beijing’s claim to be a peaceful, anti-imperialist, non-hegemonic, free-trade powerhouse.” 

Xi will be able to make good on his Davos comments at the May 14-15 One Belt, One Road (OBOR) summit. Also known as the Belt and Road initiative, OBOR is China’s blueprint for forging stronger economic connections between Asia and Europe. The summit provides China a chance to pitch its vision for becoming the center of trade, financial integration, and infrastructure development among the 65 countries that have so far signed on to projects under the initiative’s umbrella. First announced in 2013, One Belt, One Road already has $1 trillion in development and infrastructure contracts.

World leaders from 28 countries are expected to attend the summit, though Western representation is noticeably low Italy is the only G7 country expected to show. This suggests that China’s inclusive message has not resonated with the world’s largest and strongest economies.

Skeptics believe the initiative could fall short of Xi’s global leadership ambitions and may not be the new standard for international cooperation and connectivity that Beijing is hoping for. Jon Hillman, Director of the Reconnecting Asia Project at the Center for Strategic and International Studies, told The Cipher Brief that “Beneath its global banner… the Belt and Road is mostly bilateral deal-making. Particularly for trade, it is mostly an assortment of activities that China was already pursuing in some form.”

As China strives for greater global economic leadership, one industry in particular demonstrates its drive to be at the center of high-value manufacturing and exports, international infrastructure investment, and technology leadership: clean energy. According to Tim Buckley, the Director of Energy Finance Studies for Australasia at the Institute for Energy Economics and Financial Analysis, China will account for 30 percent of wind, solar, and hydroelectric installations worldwide for the next five years. Last year alone, China made 11 multibillion dollar investments abroad in the low-emissions sector.

China’s drive to expand its clean energy industry dovetails with its other global initiatives, particularly its new financial institutions. The Silk Road Fund (SRF), OBOR’s primary funding structure, and the China-led Asia Infrastructure Investment Bank (AIIB) consider clean energy investment a core value, which benefits Chinese clean energy firms. Countries seeking investment for their clean energy projects from the SRF and AIIB will likely use that loan to contract Chinese clean energy companies for installation, as they are the most cost-competitive and lead market share. While developing a high-tech industry or international financial frameworks would help growth, China’s simultaneous development of both is a force multiplier, allowing it to deepen and broaden its global reach.

The promise of the China Solution may be hard for developing, and even advanced, economies to resist. China’s stable government policies, deep pockets, and growing technical expertise in addition to its policy of noninterference and the lower lending standards of its banks make for an enticing argument. However, China’s ambitious vision for OBOR and its other initiatives may fail to live up to expectations. For example, Hillman, says that OBOR’s bilateral approach “rather than simplifying and integrating Asia’s economic landscape, the Belt and Road might further complicate it.”

Whatever flaws there may be in China’s approach to global economic leadership, they are weighed against what is ostensibly an outstretched and open hand to the world, a gesture that, for the moment, the U.S. does not match.

Will Edwards is an international producer at The Cipher Brief. Follow him on Twiter @_wedwards.