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Volume 17, Issue 15 November 22, 2017

In a Fortnight: CCP Revises Constitution For a “New Era”

Back to Normal? The End of the THAAD Dispute between China and South Korea
By Jeongseok Lee

China's Role in the Rohingya Crisis


By Sudha Ramachandran

U.S.-China Summits Point to Shift Toward Economic Statecraft


By Annie Kowalewski

China’s Relationship with Chile: The Struggle for the Future Regime of the Pacific
By R. Evan Ellis

In the wake of President Trump’s visit to China


Cold Winter: China’s Envoy and pledges of closer cooperation to address
the security on the Korean Peninsula, Beijing
to Pyongyang Leaves dispatched veteran diplomat Song Tao
Without Results ( 宋 涛 ), head of the Chinese Communist
Party’s International Liaison Department (ILD;
中联部), to Pyongyang. However, Song’s four-
North Korea’s steady drumbeat of missile day visit appears to have been fruitless. Song
launches and provocations kept relations with returned to Beijing without meeting with Kim
China and the United States tense for most of Jong-un, as he was widely expected to, and
the year. Harvest time and preparations for with little but vague promises of improved re-
the Korean People’s Armies’ winter training lations.
cycle have paused the missile launches, but
heading into winter, there are no signs of a As the head of a Communist Party body, ra-
thaw in relations (Korea Times, November 20; ther than state-affiliated organization, Song
see also Jamestown, October 11). came as an emissary looking to improve the
Party-to-Party relationship between the CCP
and Workers’ Party of Korea which in the case
ChinaBrief November 22, 2017

of North Korea is even more important than or to meet with Xi personally—indicates the
state-to-state relations. Song is also a trusted North Korean leader clearly views China as
international relations expert, having previ- less a partner and more a threat.
ously served as the Vice-Minister of the Min-
istry of Foreign Affairs, with over a decade of On November 21, the U.S. Department of
foreign affairs experience in various MFA Treasury announced an expanded list of sanc-
roles. Song was also involved in relations with tions against companies within North Korea
South Korea, and met with the envoy of then- or doing business with it (Treasury, November
newly-elected President Moon Jae-in in May 21). Several of the entities and individuals tar-
(Xinhua, May 19). geted by the sanctions are based in China,
further tightening the lockdown on economic
Because of his experience, Song has been in relations between the two countries.
charge of handling high-level contacts with
North Korea before. In 2016, Song met with Mirroring the slump in trade between China
his North Korean counterpart, Ri Su-yong and North Korea, China Airlines, one of only
(리수용), in Beijing, ahead of the latter’s meet- two carriers connecting North Korea to the
ing with Xi Jinping (FMPRC, June 1, 2016; outside world, ceased flights between Beijing
FMPRC, May 31, 2016). Similar to Song’s visit, and Pyongyang due to insufficient numbers
Ri’s intention for visiting Beijing was to con- of passengers (Sohu, November 22).
sult with the CCP and provide briefings on the
results of the Worker’s Party of Korea’s 7th For its part, North Korea appears to have no
Congress—its first in 36 years. interest in ceasing its nuclear ambitions.
South Korea’s National Intelligence Service
During this visit, Song met with Choe Ryong (NIS) believes that “depending upon North
Hae, a senior military figure considered to be Korean leader Kim's determination, a nuclear
Kim Jong-un’s second-in-command. While an test is possible any time” though the intelli-
important member of North Korea’s ruling gence service also said North Korea is strug-
party, it is a far cry from the last visit from a gling to build ICBMs capable of reentering the
senior Chinese official. In 2015, Liu Yunshan, atmosphere (Korea Times, November 20; Ko-
the now-retired member of the Politburo rea Times, November 17).
Standing Committee and propaganda chief
watched North Korea’s National Day Parade While the expansion of sanctions will clearly
side-by-side with Kim Jong-un (China Brief, stem the flow of additional cash to North Ko-
March 8, 2016). rea, forcing its government to make hard de-
cisions about allocating money to keep the
Despite China’s obvious disapproval of Kim’s government running or invest in weapons.
provocations, Beijing has deliberately worked Nonetheless, observers should remember
to improve relations on both ends of the pen- China’s own experience with building nuclear
insula and kept communications open. How- weapons.
ever, the failure of Kim to meet with Song—
2
ChinaBrief November 22, 2017

Perhaps no other country knows the struggle


Back to Normal? The End
of building a nuclear deterrent amid eco-
nomic calamity better than China. China of the THAAD Dispute
launched several extraordinarily expensive
between China and
defense projects during the twenty years be-
tween the Great Leap Forward (1958–1962) South Korea
and Cultural Revolution (1966–1976), which By Jeongseok Lee
saw dramatic economic decline and internal
political chaos. Despite these tough periods,
On October 31, after a long standoff over
China successfully tested a nuclear bomb in
1964 (China.org.cn, October 16, 2007; SCMP, South Korea’s deployment of the U.S. Termi-
November 20). Work on a nuclear submarine nal High Altitude Area Defense (THAAD) sys-
began in 1958 but the first submarine was tem, China and South Korea agreed to return
only completed twenty years later in 1974. to the “normal development track” (正常发展
轨道) (Ministry of Foreign Affairs, October 31).
Observers at the time, including the Hong
The leaders of the two countries confirmed
Kong-based China News Analyses, noted the
colossal folly of such plans. The programs, the rapprochement in a bilateral meeting dur-
spearheaded by Marshal Nie Rongzhen and ing the Asia-Pacific Economic Cooperation
General Zhang Aiping, used resources from (APEC) summit on November 11. President Xi
the country at a time when it could least af- Jinping praised the October agreement as a
ford it. Some of the projects, particularly the “fresh start,” calling for a masterplan to de-
nuclear attack and ballistic missile subma-
velop their relations further for the next
rines, offered little in the way of tangible de-
phase. South Korea’s President Moon Jae-in
terrence. However, facing the threats of the
United States and later the Soviet Union, also expressed optimism about the restora-
China prioritized nuclear deterrence at all tion of bilateral relations, citing a famous line
cost. The international community hopes from the Book of Songs (诗经), a “plum blos-
that sanctions and diplomatic leverage will som endures the pain of cold winter” (梅经寒
force the North Korean leadership to recon-
苦) (China Daily, November 11; Yonhapnews,
sider its pursuit of a nuclear deterrent. How-
November 12).
ever, it is worth keeping in mind that China,
when faced with similar hardship, also chose
to build nuclear weapons. Although it appears that the THAAD row be-
tween Beijing and Seoul is now finally over,
For more information on North Korea check the dispute is worth examining as an example
out the Jamestown Foundation’s North Korea of how China uses its economic power to co-
Backgrounder
erce other countries into meeting its de-
***
mands.

3
ChinaBrief November 22, 2017

How the THAAD Dispute Began third party” (Ministry of National Defense, July
8, 2016).
Until South Korea’s decision to deploy THAAD
in 2016, Beijing and Seoul maintained an ex- Despite the caveats, China was furious. Thirty
cellent relationship. Previous South Korean minutes after the South Korean announce-
President Park Geun-hye pleased Xi by at- ment, the Chinese foreign ministry expressed
tending China’s military parade commemo- “strong dissatisfaction and firm opposition” (
rating the 70th anniversary of the end of 强烈不满和坚决反对) (MFA, July 8, 2016). Ac-
World War II, despite U.S. concern over cording to one estimate, during the month
Seoul’s tilting relationship with Beijing (China that followed the Chinese government issued
Brief, September 16, 2015). Although China 27 statements and People’s Daily ran 265 ar-
had occasionally expressed its concerns ticles criticizing Seoul’s decision (JoongAng
about South Korea’s potential introduction of Ilbo, December 7, 2016).
THAAD, Seoul reassured Beijing by maintain-
ing “Three No’s”—there had been no request, South Korean policymakers downplayed mes-
no consultation, and no decision regarding saging from Beijing, and underestimated the
the THAAD issue made by the United States risk of China’s retaliation. Deputy Prime Min-
or South Korea (OhmyNews, March 11, 2015). ister Yoo Il-ho predicted that “as a member of
WTO, China may find it difficult to take puni-
The Sino-South Korean honeymoon reached tive economic measures on political issues,”
a turning point after North Korea’s fourth nu- and Prime Minister Hwang Kyo-ahn confi-
clear test in January 2016. A week after the dently stated that “it may not be easy [for
test, President Park stated that she would re- China] to bring economic retaliation due to
view the issue “solely based on our security the structural economic interdependence be-
and national interests” (Seoul Shinmun, Janu- tween the two countries” (Jugan Kyunghyang,
ary 13, 2016). South Korea soon began dis- February 23, 2016; News 1, July 19, 2016).
cussions with the United States, and on July 8,
it officially announced that THAAD would be China’s Economic Retaliation Against
installed as a “defense measure to protect the South Korea
people of South Korea and the armed forces
of the South Korea-U.S. alliance.” Seoul also In the following months, however, China
tried to satisfy Beijing by stressing that the proved that it had a variety of methods at its
system “will focus only on the threats from disposal to damage the South Korean econ-
North Korea and will not be used against a omy.

4
ChinaBrief November 22, 2017

Fallout from the THAAD dispute affected the to extensive tax investigation and safety in-
entertainment industry first. From August spections (Chosun Ilbo, December 1, 2016). As
2016, Korean celebrities who had enjoyed a result, 87 out of Lotte’s 112 hypermarket
enormous popularity in China began to dis- stores in China were shut down, and its mega-
appear from Chinese TV shows and commer- construction projects were stalled. According
cials for unclear reasons. Concerts were sud- to one estimate, the South Korean conglom-
denly cancelled, and it was rumored that the erate suffered $2.2 billion in losses (Yonhap-
Chinese state agencies had banned Korean news, October 31).
shows, movies and celebrities (限韩令, xian-
hanling) (Chosun Ilbo, September 27, 2016). As Seoul continued the deployment process
in 2017, Beijing turned the screw further to
The next target was the tourism industry. In put more pressure. Along with increasing
October 2016, Korean news media reported sanctions on the entertainment and tourism
that China’s National Tourism Administration industries, China began to impose informal
(NTA) instructed Chinese travel agencies to penalties on South Korean consumer goods
decrease the number of South Korea-bound companies. According to an investigation by
travelers by 20 percent (JoongAng Ilbo, Octo- South Korea’s government ministries, be-
ber 25, 2016). The next day, stock prices of tween March and October 2017, hundreds of
major South Korean hotel chains, cosmetics South Korean companies handling consumer
companies, and duty-free shops, which had goods in China were subjected to various in-
been earning more than half of their revenues formal punitive measures such as delayed
from Chinese tourists, fell by seven to eight customs clearances, tightened sanitary in-
percent. The NTA immediately denied the re- spections, forced removal of products from
port, but did not respond to the South Korean stores, unilateral cancellation of marketing
government’s repeated requests for an expla- events and refusal of business visas.
nation of the decrease (Global Times, October
26, 2016; Yonhapnews, December 8, 2016). During this campaign, China’s economic re-
prisals had three distinctive features:
Despite Beijing’s pressure, Seoul did not stop
the deployment. In November 2016, Korean First, Beijing punished Seoul in an informal,
conglomerate Lotte agreed to provide its golf but visible manner. China maximized the sym-
course in the southeastern county of Seongju bolic and psychological impact of sanctions
as a deployment site. Beijing responded by by selecting the entertainment and tourism
launching massive retaliation against Lotte, industries as its first and second targets. Alt-
subjecting the retail giant’s business in China hough these industries only accounted for
5
ChinaBrief November 22, 2017

less than five percent of South Korea’s China- holding approximately 18 percent of South
bound exports, they easily attracted the me- Korea’s public debts (Financial Supervisory
dia’s attention, increasing the visibility of the Service, March 17, 2016). China could have se-
sanctions. However, the Chinese government verely damaged Seoul’s financial market by
avoided public acknowledgement of the selling South Korean bonds, but chose not to
sanctions by not issuing formal legislation or use that option. It appears that China shied
documented instructions, and has never ad- away from attacking the financial sector be-
mitted the very existence of government- cause such a drastic measure might prompt
sanctioned punitive measures related to the Seoul to turn its back on Beijing entirely. Due
THAAD dispute. South Koreans felt the in- to the economic reprisal, for the first time in
creasing economic pain inflicted by Beijing, modern history, China became the most un-
but it was not easy for them to point the fin- popular country among the South Korean
ger at the Chinese leadership due to the lack people in March 2017 (Asan Institute, March
of tangible evidence. 19). In such a situation, South Korea’s presi-
dential election triggered by President Park’s
Second, China minimized the negative impact impeachment may have led Beijing to save
on its own economy by carefully targeting the this ‘nuclear option’ and further observe po-
South Korean companies outside of its man- litical developments in Seoul with caution
ufacturing value chain. South Korea’s essen- (China Brief, April 20).
tial role in the global value chain has been as
a provider of intermediary goods for China. The New Three No’s and the End of the
Thus, if Beijing wanted to inflict maximum Dispute
pain on Seoul, it would have targeted the in-
termediary goods in the IT sector, such as dis- Soon after his inauguration in May 2017,
play panels and semiconductors, which ac- President Moon demonstrated considerable
count for the largest share—about 50 per- effort to restore the relationship with China
cent—of South Korea’s exports to China (KO- through multiple diplomatic channels. Beijing
TRA, August 28). Such a move would have responded with positive signals such as high-
damaged China’s electronics companies, level contacts and the renewal of the bilateral
which lacked viable alternative providers of currency swap deal in mid-October. On Octo-
these key components. ber 31, Beijing and Seoul announced a joint
statement on their rapprochement.
Third, China did not attack South Korea’s fi-
nancial sector, its weakest point. In February The rapprochement deal shows that China
2016, Beijing became Seoul’s biggest creditor, and South Korea decided to end their feud by
6
ChinaBrief November 22, 2017

seeking common ground while putting differ- Although Seoul did not remove its THAAD
ences aside (求同存异). Although the joint battery, it appears that Beijing agreed to end
statement declared a restoration of their bi- its economic retribution in return for Seoul’s
lateral cooperation, it revealed the remaining new “Three No’s” policy. Although the joint
difference between the two parties’ views re- statement did not mention the punitive
garding the nature and implications of measures Beijing had taken against Seoul, ac-
THAAD. Beijing restated its opposition to cording to South Korean officials who partici-
THAAD, its concerns about the U.S.-led re- pated in the negotiation, Chinese officials im-
gional Missile Defense (MD) program, the de- plicitly suggested the lift of the sanctions by
ployment of additional THAAD batteries, and promising that South Koreans “will now be
the U.S.-South Korean-Japanese military co- able to feel the warmer atmosphere in the bi-
operation (MFA, October 31). lateral relations” (Chosun Ilbo, October 31).

Seoul did not explicitly present its position on While restoring its relationship with Beijing,
the latter three issues in the statement, but it Seoul also began to seek a way to decrease
answered Beijing’s requests indirectly. On Oc- its economic dependence on China. In No-
tober 30, a day before the announcement of vember, unveiling his “New Southern Policy,”
the joint statement, South Korea’s Foreign Moon announced his plan to increase South
Minister Kang Kyung-wha stated in a National Korea’s trade with the Association of South-
Assembly hearing that Seoul had no intention east Asian Nations (ASEAN) to the same level
to (1) install additional THAAD batteries, (2) as its trade with China (JoongAng Ilbo, No-
participate in a regional missile defense sys- vember 10). Further moves by South Korean
tem, and (3) form a trilateral alliance with the corporations, some of which already began to
United States and Japan (Chosun Ilbo, Octo- diversify their investments from China to
ber 30). Although the immediate audience Southeast Asia and India, are expected to ex-
was South Korean lawmakers, the real recipi- pand Seoul’s effort.
ent of the message was Beijing, which imme-
diately welcomed Seoul’s new “Three No’s” Conclusion
policy (MFA, October 30). Furthermore, Presi-
dent Moon reconfirmed this policy by stating For President Xi, the final outcome of the eco-
that he did not think the trilateral alliance is nomic coercion against South Korea may be
desirable and will pursue “a balanced diplo- considered a partial success. Although
macy with the US as well as China” (Channel THAAD will remain in South Korea, he suc-
NewsAsia, November 3). ceeded to draw Seoul’s reassurance to Beijing

7
ChinaBrief November 22, 2017

that South Korea will distance itself from a re-


Rohingya Crisis: Will China’s
gional missile defense system and a potential
anti-China coalition. This is not a minor
Mediation Succeed?
By Sudha Ramachandran
achievement for China, which has to address
the challenge of an emerging “Indo-Pacific”
security network led by the United States. During his visits to Dhaka, Bangladesh and
Naypyitaw, Myanmar on November 18 and
19, China’s Foreign Minister Wang Yi put for-
The final agreement was not a bad deal for
ward a three-phase plan to resolve the Roh-
South Korea’s President Moon either, since ingya crisis. First, Wang called for a ceasefire
the new “Three No’s” are not really new for in Myanmar’s devastated Rakhine state, which
Seoul, which had always been cautious of par- is at the center of the crisis. Aimed at restor-
ticipating in regional missile defense and ing order and stability in the Rakhine state,
strengthening its security cooperation with the ceasefire is expected to halt the flow of
Rohingya refugees to Bangladesh. China en-
Tokyo. Unlike his predecessor Park, who dis-
visages that this will pave the way for the sec-
appointed Xi with her sudden decision to de-
ond stage: negotiations between Myanmar
ploy THAAD after the long honeymoon with and Bangladesh to address the refugee prob-
Beijing, Moon is more likely to remain com- lem. The third and final stage will involve the
mitted to balanced diplomacy to receive economic development of the Rakhine state
China’s support and assistance in implement- to address the underlying causes of the vio-
ing his engagement policy toward North Ko- lence (Global Times, November 20). China’s
plan has reportedly found acceptance in
rea.
Naypyitaw and Dhaka and marks the start of
a new phase in Beijing’s involvement in the
Jeongseok Lee is a PhD candidate in Public and Rohingya conflict (FMPRC, November 20).
International Affairs at Princeton University China’s role has hitherto been limited to
and a student affiliate in the Princeton-Har- providing humanitarian aid to the Rohingya
vard China and the World Program. He is cur- refugees and protecting Myanmar from inter-
national censure. Why is China now adopting
rently a visiting research associate at the Reis-
a mediatory role in the conflict? And is it likely
chauer Center for East Asia Studies at Johns
to succeed in bringing peace to a restive re-
Hopkins University School of Advanced Inter- gion?
national Studies (SAIS).
The Rohingya Conflict
***
The Rohingya crisis began on August 25 when
the Myanmar government declared the Ara-
kan Rohingya Salvation Army (ARSA) a terror-
ist organization in response to deadly attacks
8
ChinaBrief November 22, 2017

on police and army posts in Rakhine state in China’s Support


western Myanmar (Mizzima, August 28). It
also launched a military crackdown in The Myanmar military’s reported atrocities
Rakhine, which it maintains is aimed at the against fleeing Rohingya civilians have
militants (Mizzima, October 16; Terrorism evoked international outrage. UN Human
Monitor, November 10). However, horrific vi- Rights Council Chief Zeid Ra‘ad al-Hussein
olence has been unleashed on Rohingya civil- described the situation in the Rakhine state as
ians, including women and children. Entire vil- “a textbook example of ethnic cleansing” (UN
lages have been razed. Over 600,000 of the News Centre, September 11). Several Muslim
estimated 1.1 million Rohingya in Myanmar countries and the western powers have criti-
are reported to have fled to Bangladesh (The cized Myanmar’s brutal crackdowns on the
Wire, November 17). The current crisis is the Rohingya too (Arab News, September 5 and
most severe that the decades-old Rohingya FirstPost, September 23).
conflict has witnessed.
However, China has publically praised the
While the roots of the Rohingya conflict (like Myanmar government’s crackdowns in
Myanmar’s other ethnic conflicts) can be Rakhine. In September, the Chinese ambassa-
traced back to colonial times, independence dor to Myanmar, Hong Liang, “strongly wel-
brought with it discrimination against the comed” “the counterattacks of Myanmar se-
Rohingya that became systematic and seri- curity forces against [Rohingya] extremist ter-
ous. A Muslim ethnic group that has inhabited rorists” and described its military campaign as
the Rakhine state for centuries, the Rohingya “just an internal affair” (The Global New Light
do not figure among Myanmar’s 135 official of Myanmar, September 14). Later that
ethnic groups. Since 1982, they have been de- month, Hong assured the Myanmar govern-
nied citizenship, effectively rendering them ment that China would stand “firmly” by it on
stateless (Daily Sabah, October 23). In addi- the international stage and continue provid-
tion to suffering at the hands of the military, ing it with “necessary assistance” to help it
the Rohingya have been targeted by Rakhine “uphold internal stability and development”
Buddhist vigilante groups too (The Wire, No- (The Irrawaddy, September 27).
vember 17). The violence has triggered waves
of Rohingya migration to neighboring coun- At the UN, China has blocked resolutions
tries like Bangladesh, Thailand, India, against Myanmar and forced statements crit-
Malaysia, and Indonesia. Unwelcome in these ical of its brutal military campaign against the
countries as well, Rohingya refugees have Rohingyas to be watered down. On Novem-
been pushed back or languish in makeshift, ber 6, for instance, the UN Security Council
overcrowded camps (The National, Septem- (UNSC) expressed “grave concern over re-
ber 13). ports of human rights violations and abuses
in Rakhine State” and called on the Myanmar
government “to ensure no further excessive
use of military forces” there (United Nations,

9
ChinaBrief November 22, 2017

November 6). While this was strong censure inces as well as that of other counties and cit-
of the Myanmar military’s use of force against ies. Since April this year, oil from Rakhine is
the Rohingya, this being a statement—and being transported to China through a pipeline
not a resolution—is not enforceable. China running parallel to the gas pipeline (China
and Russia are reported to have forced the Daily, May 11 and Mizzima, October 31).
UNSC to issue a presidential statement rather
than a resolution. The UNSC statement de- China is said to have invested around $2.5 bil-
nounces Myanmar’s violent handling of the lion in the oil and gas pipeline projects and is
crisis but it is inconsequential. also investing $10 billion in the Kyaukphyu
Special Economic Zone, which will include a
China’s Interests in Rakhine deep-sea port and an industrial park, with the
goal of turning Kyaukphyu into a maritime
China’s interest in the Rakhine state stems economic hub (Mizzima, October 31).
from its strategic location and rich resources.
The state is located on the Bay of Bengal, The areas that are the worst affected by the
which opens into the Indian Ocean. Like Paki- ongoing violence are in the north of Rakhine,
stan’s Gwadar port, which enables Beijing to near Myanmar’s border with Bangladesh. Alt-
transport West Asian oil, gas and other com- hough neither Kyaukphyu nor the oil and gas
modities through a shorter route via Pakistan pipelines are located in or run through these
to underdeveloped western China, the long restive areas, Beijing is still concerned. The
Rakhine coastline provides southern China rise of ARSA and its mounting capacity to
with access to the sea and eastern China with carry out attacks on well-secured targets indi-
a shorter route to the Indian Ocean (China cates that it is only a matter of time before it
Brief, July 31, 2015 and Mizzima, October 31). strikes outside its stronghold. This has trig-
Ports and pipelines in Rakhine significantly gered concern in Beijing over the safety of in-
free China’s trade with Africa and West Asia, frastructure it has invested and built in the
especially its oil imports, from dependence on Rakhine state.
the congested Straits of Malacca (China Brief,
July 31, 2015). The Rakhine state plays a significant role in
China’s Belt and Road Initiative (BRI). Like
Additionally, Rakhine is rich in natural re- Gwadar port in Pakistan, Kyaukphyu port and
sources. Large gas reserves were discovered Myanmar will be important links in both the
in the waters off its coast in 2004. Beginning Maritime Belt and Silk Road components of
in 2008, China has bought gas from the area the BRI. As a result, the “stability of Rakhine”
and transported it from Kyaukphyu on is regarded as “important” to the success of
Rakhine’s coast to China’s Yunnan Province the BRI, political and ethnic affairs analyst U
through the Myanmar-China Gas Pipeline Maung Maung Soe has said (The Irrawaddy,
since 2013. This gas meets the needs of September 4). Concerns over the impact that
China’s Yunnan, Guizhou and Guangxi prov- violence and unrest in Rakhine could have on
the success of its projects in Myanmar and the

10
ChinaBrief November 22, 2017

BRI, in particular, underlie China’s interest to To ease Dhaka’s burden of looking after the
end the Rohingya crisis and restore stability in Rohingya refugees, China is providing aid, in-
the region. cluding tents and blankets to Rohingya refu-
gees in Bangladesh (Xinhuanet, October 13).
China’s Strong Ties with Bangladesh Chinese leaders are concerned with Bangla-
desh’s attempts to draw extra-regional pow-
China has similarly invested heavily in up- ers to intervene in the crisis, prompting Bei-
grading and building port infrastructure, jing to accelerate efforts to bring Myanmar
roads, bridges and railway lines in Bangladesh and Bangladesh to the negotiation table and
too. It is also Bangladesh’s top trade partner; end the refugee problem.
Bangladesh provides a large market for Chi-
nese goods. Defense ties are strong as well; Will China’s Mediation Work?
Bangladesh is the second largest importer of
Chinese weapons (after Pakistan) and ac- In the past, China avoided playing mediator in
counted for 82 percent of all Bangladesh conflicts beyond its borders, arguing that this
weapons purchases between 2009–2013 went against its principle of non-interference
(China Brief, June 21, 2016). in the internal affairs of sovereign countries.
However, in recent years it has shown increas-
China is also keen to protect its strong and ing willingness to mediate an end to conflicts.
growing interests and ties in Bangladesh. It has, for instance, been involved in efforts to
There is concern in Bangladesh about Myan- bring the Afghan government and the Taliban
mar’s military campaign against the Roh- to the negotiation table (Express Tribune,
ingya, which is directly responsible for the March 7). More recently, it undertook shuttle
flood of refugees into Bangladesh and has left diplomacy between Afghanistan and Pakistan
Dhaka with the burden of providing shelter to arrest spiraling tensions between the two
and relief to the Rohingya refugees. Not only neighbors (Times of India, June 26). China ap-
has Myanmar’s military strategy contributed pears to be taking on a mediatory role in re-
to the refugee exodus but also, this has trig- gions where it has strong economic and other
gered Rohingya militancy. For Bangladesh, interests, and is the primary motivation be-
which is grappling with an array of jihadist hind Beijing’s mediation in the Rohingya cri-
groups already, the emergence of ARSA and sis.
the reported training of its cadres in sanctu-
aries in Bangladesh, poses an additional secu- China’s promotion of a military-economic de-
rity threat. China’s endorsement of Myan- velopment approach to the Rohingya crisis
mar’s strategy on the Rohingya issue has un- can be expected to worsen the conflict. De-
derstandably evoked “great disappointment” velopment of a violent region by external ac-
in Dhaka (Daily Star, November 13). tors rarely benefits locals, as seen in Pakistan’s
Baluchistan province. China’s development of
Gwadar port in the region prompted militants
to target outsiders (Express Tribune, April 12,

11
ChinaBrief November 22, 2017

2015; China Brief, July 31, 2015). Projects in diate in conflicts within and between coun-
Rakhine are likely to benefit foreign investors, tries where it has significant interests, espe-
Rakhine Buddhists and the Barmar majority, cially involving countries that are part of the
not the marginalized Rohingya. Development Belt and Road Initiative.
that does not result in economic inclusion of
the Rohingya will deepen existing grievances Dr. Sudha Ramachandran is an independent
and generate new conflicts. researcher and journalist based in Bangalore,
India. She has written extensively on South
To resolve the conflict, it is important that My- Asian peace and conflict, political and security
anmar tackle the roots of the problems, which issues for The Diplomat, Asia Times Online,
are primarily political: denial of citizenship and many others.
and rights to the Rohingya people and dis-
criminatory policies. China is unlikely to ***
nudge Myanmar on the citizenship issue.
Moreover, Myanmar’s military is known to be
U.S.-China Summits Point to
sensitive regarding state sovereignty, and is
unlikely to respond positively to Chinese Shift Toward Economic
pressure on these issues.
Statecraft
Annie Kowalewski
China may have significant political and eco-
nomic influence in Bangladesh and Myanmar
but it lacks other qualities that a mediator During President Trump’s trip to Beijing and
would need to succeed in settling the Roh- the ASEAN Summit in November 2017, Presi-
ingya conflict. Notably, Bangladesh believes dent Trump and President Xi confirmed that
that China is biased towards Myanmar, and the future of U.S.-Chinese relations will focus
Beijing’s substantial economic and other in- largely on opportunities for U.S. and Chinese
terests in Rakhine can be expected to fuel My- businesses, potential security cooperation,
anmar’s suspicions of China’s intentions and and ongoing points of friction. The ASEAN
actions. Summit also solidified China’s intentions to
become a regional leader offering a new
Conclusion model of development, and the United States’
focus on domestic economic protection.
Chinese mediation is unlikely to resolve the
Rohingya conflict. At best, its intervention Market-Driven Economic Ties
could keep a lid on the violence being un-
leashed by the Myanmar military in the Throughout the course of the two-day meet-
Rakhine state. This could usher in a measure ing, Presidents Trump and Xi concluded $250
of stability but not peace in Rakhine. In the billion worth of commercial deals, most of
future, China can be expected to offer to me- which involve Chinese companies buying U.S.
energy, technology, and farm products

12
ChinaBrief November 22, 2017

(Global Times, November 14). The largest of itself to foreign investments. In the first half of
these deals was an agreement from the Chi- 2017, foreign investment in China fell 1.2 per-
nese state-owned China Energy Investment cent, approximately $72 billion, due to strin-
Corp to invest $83.7 billion in power genera- gent regulation and intellectual property
tion, chemical manufacturing, and under- theft. In response, China has adopted policies
ground storage of natural gas liquids and de- and lifted restrictions that have limited for-
rivatives in West Virginia. Additionally, Si- eign investment in China. For example, in Jan-
nopec, the Bank of China, and Alaska Gasoline uary and August 2017, the Chinese State
agreed on a major natural gas project worth Council announced that it would improve in-
$43 billion. Other notable deals include a con- tellectual property protection and allow for-
firmed $37 billion sale of 300 Boeing jets to eign investors to freely remit investment
China Aviation Supplies Holding Company, gains from the country to maintain foreign in-
$12 billion sale of Qualcomm semiconductors vestment flows (Gov.cn, January 13; Gov.cn,
to three Chinese mobile companies, and an August 17). In November 2010, China’s Vice
agreement between Goldman Sachs and Chi- Finance Minister Zhu Guangyao also an-
nese state-owned China Investment Corp. to nounced that China would start allowing for-
invest $5 billion in U.S. manufacturing, indus- eign investors to own 51 percent of Chinese
trial, consumer and healthcare companies security firms, fund managers, and future
(Caixin, November 9). companies—a substantial increase from the
current limits of 25 percent for publicly traded
Chinese media heralded these deals as a pos- security firms. He also stated that China would
itive step demonstrating President Trump’s increase similar limitations on foreign invest-
commitment to “business over politics,” and ment in insurance companies and banks. Yet
lauded Trump as a U.S. president “finally in- despite these positive reforms, concerns
terested in economic interests.” Clearly, the about Chinese surveillance and commercial
perception in Beijing is that Trump demon- espionage continue have had a chilling effect
strated a willingness to pursue U.S. commer- on foreign investment. For example, China
cial business opportunities with China without still requires all foreign firms to store financial
leveraging broader political or strategic goals data on Chinese-made and approved tele-
to do so. If true, this marks a shift from previ- communication devices per China’s 2015 cy-
ous administrations, which have tended to tie bersecurity laws, opening foreign firms and
shifts in U.S. economic relations with China to investors to the risk of intellectual property
wider human rights or geopolitical concerns. theft. While the deals concluded during
Yet other Trump administration officials have Trump’s meeting clearly illustrate China’s will-
dismissed this approach, noting that the com- ingness and need to increase ties with foreign
mercial deals were largely non-binding mem- businesses, whether China can properly re-
orandums and therefore “nothing new”. form its domestic regulations to support for-
eign investment in China remains unclear.
What these deals do raise, however, are ques-
tions about how China is reforming to open

13
ChinaBrief November 22, 2017

Increased Security Cooperation and the history of U.S. Navy presence in the East
Ongoing Points of Friction and South China Seas to underline the United
States’ commitment to remaining an active
In Beijing, Trump and Xi also emphasized op- player in the region (Whitehouse.gov, No-
portunities for U.S.-Chinese cooperation on vember 13). While the two leaders remained
several ongoing security matters but made firmly committed to their current courses of
little progress in resolving tensions in the East action, ongoing issues such as disagreements
and South China Seas or in dealing with the surrounding U.S. freedom of navigation oper-
North Korea issue. During their joint press ations in the South China Sea and potential
statement, the leaders highlighted the need Chinese militarization of the Scarborough
for multilateral and bilateral diplomatic and Shoal were not mentioned at either of these
security dialogues, and identified transna- summits.
tional crime and counterterrorism in the Mid-
dle East as opportunities for further coopera- Similarly, while both sides agreed that they
tion (Whitehouse.gov, November 9). The two would “cooperate” to address the North Ko-
sides also identified areas for de-escalation rea issue and agreed that it is in both coun-
and conflict management, such as expanding tries’ best interests to seek a denuclearized
military-to-military ties with the joint staff di- Korean peninsula, Xi and Trump differed in
alogue and engaging in disaster manage- their approaches. Xi once again called on the
ment joint exercises. While theoretically these United States to respect territorial sover-
mechanisms can be a useful tool in managing eignty and seek peaceful solutions to the is-
escalation dynamics in the seas and with sue, while Trump took a more hardline stance,
North Korea, ultimately such discussions do calling on all countries to “stop arming and
not address the fundamental differences in financing and even trading with the murder-
U.S.-Chinese interests these scenarios. ous North Korean regime” (Whitehouse.gov,
November 9). Ultimately, this mismatched
As such, both leaders remain at an impasse in rhetoric reveals that fundamental differences
tackling the issues in the East and South China in U.S.-Chinese approaches to these issues
Seas and North Korea. In Beijing, Xi declared have yet to be resolved.
that the Pacific Ocean was “big enough for
both China and the United States” and re- Divergent Trajectories
peated the official Chinese line urging the
United States to respect countries’ territorial The Xi-Trump meetings also highlighted the
sovereignty. Xi clearly has no intention to differences between how the United States
change China’s course in the East and South and China will engage with the Asian-Pacific
China Seas, and will continue to assert China’s region at large. In Beijing and Vietnam, Xi po-
“historic right” to build its presence in the re- sitioned China as a champion of Asian devel-
gion. Later, during the ASEAN summit, Trump opment and advertised Chinese-led initiatives
emphasized the importance of U.S. interests and institutions, ultimately furthering Chinese
in the region and provided a long narrative on interests. Xi emphasized China’s commitment

14
ChinaBrief November 22, 2017

to “economic globalization through multilat- “fair and equal basis” and that the current
eral schemes for free trade” and purported trade balance was “unacceptable.” Essentially,
China’s own economic growth as a “new Trump pitted Asian-Pacific regional develop-
model of development”. At the Asia Pacific ment against that of the United States’ do-
Economic Cooperation (APEC) CEO Summit, mestic economic growth. This suggests that
Xi set out four steps to help the Asia-Pacific the Trump administration will prioritize U.S.
“advance with [the] trend of [the] times,” markets and businesses over those in the
namely, an Asian free trade area, innovation- Asia-Pacific and potentially limit or even with-
driven development, interconnected devel- draw investment in the region. The ASEAN
opment through the Belt and Road Initiative, summit thus illustrated that, while Xi turns
and providing economic stability for all peo- outward to boost regional growth and devel-
ples (China Daily, November 11). These ech- opment, Trump will retreat inward to protect
oed Xi’s sentiments during his 19th Party Con- the United States’ domestic economy. How-
gress speech where, over the course of three ever, waning U.S. influence in the Asian-Pa-
hours, he highlighted Chinese economic cific region is not in the United States’ best
achievements as an example of how countries interests. To better solidify U.S. power in the
can reform and grow without following tradi- region, the United States should better de-
tional, Western models of development velop economic statecraft options in its Asia-
(Xinhua, October 18). Such rhetoric reveals Pacific strategy.
that Xi has clearly aligned the development of
the Asian-Pacific region with that of China’s, Conclusion
and will continue to expand Chinese influence
in the region through economic ties and de- Trump’s twelve-day Asia trip highlighted the
velopment. potential areas of cooperation and conflict
with the United States’ most important stra-
In contrast, at ASEAN a few days earlier, tegic partnership. After his meeting in Beijing,
Trump emphasized the need for the United President Trump touted the “great chemistry”
States to protect its economic interests at he had with President Xi. It was this “great
home and in the region (Whitehouse.gov, No- chemistry” that allowed Trump and Xi to con-
vember 10). Like Xi, Trump acknowledged the clude a number of business deals and identify
need for a free and open Indo-Pacific and areas of increased security cooperation. Yet
how economic opening up was crucial to the uncertainty about Chinese openness to for-
region’s development. But Trump focused his eign investment and outstanding questions
remarks at ASEAN on the United States’ “un- on a number of ongoing issues remain un-
fair treatment” by the World Trade Organiza- solved, largely due to the fundamentally dif-
tion and the damage done by government- ferent interests and approaches of the United
run industrial planning and state-owned en- States and China. Both countries will continue
terprises. While he did not name China explic- to increase their presence in the East and
itly, Trump also emphasized that the United South China Seas, as well as struggle over
States needed to be able to compete on a

15
ChinaBrief November 22, 2017

how much pressure to place on North Korea


China’s Relationship
and countries with ties to North Korea.
with Chile: The Struggle
In the region at large, Presidents Trump and
for the Future Regime of
Xi laid out vastly different perspectives on
how to engage with the Asia-Pacific. While Xi the Pacific
aims to economically integrate the region and By R. Evan Ellis
boost trade and investment, the United States
will prioritize its own economy. However, fo-
Though superpower diplomacy dominated
cusing only on the United States’ domestic
coverage of the Asia Pacific Economic Coop-
economy and withdrawing from the Asian-
eration forum (APEC) leaders summit in No-
Pacific region ultimately diminishes the
vember, China’s upgrading of a free-trade
United States’ ability to shape the region to
agreement with Chile served to highlight the
promote its own interests. While it is unclear
strength of an economic and political rela-
whether President Trump will adopt an Asia
tionship that it has built with the country, and
strategy that focuses more on economic
the influential position Chile currently occu-
statecraft, what is clear is that the future of
pies in shaping Chinese engagement with
U.S.-Chinese relations and U.S.-Chinese influ-
Latin America.
ence in the Asia Pacific will be largely rooted
in commercial and economic concerns.
The agreement signed at APEC builds on a
free-trade agreement first signed in 2005—
Annie Kowalewski is an MA Candidate at
the first of its kind between a South American
Georgetown University’s Center for Security
nation and China. At first glance, China’s in-
Studies. She focuses on PLA modernization,
teractions with Chile appears to resemble its
Chinese military strategy, and U.S. defense pol-
pattern of behavior with the region in general.
icy in East Asia.
Chile’s exports to the China are dominated by
a limited number of low value-added com-
*** modities, including copper and potassium ni-
trate (used as fertilizer). Correspondingly, a
broad range of Chinese products have signif-
icantly penetrated the Chilean market, from
cheap manufactured goods, to motorcycles,
cars, cell phones and computers.

On closer examination, China’s relationship


with Chile has multiple elements that distin-
guish it from its relationship with others in
Latin America.

16
ChinaBrief November 22, 2017

Chile has been one of the most successful


countries in the region in establishing a na- Further inhibiting Chinese investment, Chile’s
tional brand in the PRC and positioning its mining sector, the principal source of the
products in the non-commodity goods seg- country’s exports to the PRC, is generally off
ment of the Chinese market. Chile last year re- limits to equity investments. While the Chil-
placed Vietnam as the principal supplier of ean state mining entity CODELCO signed a
fresh fruit imported by the PRC (Santiago $500 million agreement in 2005 for the ad-
Times, April 2). Although the time and ex- vance purchase of Chilean copper, the deal
pense of shipping products to the PRC cre- went sour when the Chileans found them-
ates a barrier for non-differentiated agricul- selves locked into a long-term agreement to
tural goods, Chile has successfully positioned sell almost 5 percent of their copper exports
its cherries, table grapes, blueberries as luxury to the PRC at prices substantially below the
goods in China. Chilean wines have achieved market price. The Chilean government ulti-
similar recognition in the PRC, as consump- mately forced Minmetals to back out of its
tion by the Chinese middle class grows. option to acquire a 49 percent the Gabriel
Mistral (Gaby) mine, which it had used the
Despite such success, and Chile’s reputation Chinese loan to develop (Business News
for efficiency, security, and rule of law, invest- Americas, September 29, 2008). Chinese in-
ment by Chinese companies in the country terest in investing in the Chilean mining sec-
ranks among the lowest in the region. The tor virtually disappeared for years thereafter.
Chilean government has taken note of the
contrast between its successes in exporting its Despite such setbacks, in recent years, Chi-
products to China, with its inability to attract nese have expressed renewed interest in Chil-
significant Chinese investment. The annual ean mining, focused on lithium, a strategic
“Chile Week” program, conducted in six of metal used in modern batteries to power de-
China’s largest cities since 2015, is an example vices from cars to cellphones.
of attempts by the government of Michelle
Bachelet to remedy this deficiency (Santiago Beginning in 2016, Chinese mining company
Times, August 30). Tianqi quietly began acquiring a minority
share of Chilean lithium producer SQM. In Oc-
Ironically, the lack of Chinese direct invest- tober 2017, the Chinese petrochemicals giant
ment in the country partially reflects Chile’s Sinochem made public an intention to ac-
relatively good governance and strong insti- quire a majority stake in SQM for $4.5 billion
tutions; Chinese companies often prefer to in- from the Canadian firm Potash (La Tercera,
vest where they can secure state-to-state October 23, 2017). The Chilean government is
deals on preferential terms. Chile, with its currently evaluating bids for “value-added”
good access to capital markets has not felt development of its lithium reserves, in which
compelled to adapt its laws and regulations, four of the 12 companies bidding are Chinese.
such as those governing public procurement, Each bidder must propose a project for how
to attract Chinese loans or investors. it will provide value added to the lithium

17
ChinaBrief November 22, 2017

within Chile. One contender is the Chinese country might turn to China’s Beidou satellite
MTL-Shenzen group, who, with a Korean part- to replace it (Xinhua, April 27, 2016).
ner, is proposing a project to build a factory
to build lithium-ion batteries in the area With respect to the electricity sector, one of
where it will extract the metal (La Tercera, July the largest investments by a PRC-based com-
7). As China attempts to position itself as a pany in Chile was that of Sky Solar, which
leader in battery technology and production, committed to invest more than $1.3 billion to
these investments in strategic materials will construct farms of photovoltaic cells to gen-
be key to keeping Chinese batteries cheap erate solar energy in the Atacama Desert (El
and globally competitive. Mercurio, January 25, 2013). Chinese compa-
nies have also been involved in a series of
In the telecommunications sector, as in other projects for wind generation (Global Wind En-
parts of Latin America, the Chinese company ergy Council).
Huawei has established itself as an important
player in the mobile telephone market, to in- Despite such advances, and although power
clude commercial facilities, and presence as a generation and transmission in Chile is in the
local brand, including the recruitment of one hands of the private sector with a relatively
of Chile’s best-known soccer players as the modest regulatory burden, Chinese compa-
face of the company in its Chilean advertising. nies have not yet entered the sector in force,
Huawei has also won a contract for one of as Chinese companies such as State Grid,
three tranches of a project to construct a sub- Three Gorges and State Power Industrial Cor-
marine fiber-optic cable connecting the south poration (SPIC) have entered Brazil (Newsmax,
of Chile from Puerto Montt to Puerto Williams, October 9, 2017). Nonetheless, that may be
which may be a stepping stone for a Huawei changing with SPICs acquisition of Pacific Hy-
role in an even more ambitious cable con- dro, which gives the company control over
necting China to South America through Chile five hydroelectric facilities in Chile (Hy-
(Ministerio de Transportes y Telecomunica- droworld, December 17, 2015).
ciones, October 16, 2017).
Chile’s stable and developed financial system
In the space sector, the PRC is building an ob- and access to international capital markets
servatory approximately 30 miles from the fa- has limited the need for loans from Chinese
cility that it already shares with Chile’s Catho- policy banks such as China Development
lic University, in Paranal, in the Atacama De- Bank and China Export-Import bank, often
sert (La Tercera, 2016). Although in 2008, the tied to the use of Chinese companies and la-
China Aerospace Science and Technology borers in the projects financed. Yet the same
Corporation (CASC) lost a bid to participate in strength and sophistication of Chile’s financial
the Chilean FASAT-C satellite program to the system has also allowed the country to be-
European firm Astrium, as the satellite neared come the regional hub for clearing transac-
the end of its useful life, Chile’s ambassador tions conducted in Chinese RNB. To this end,
to the PRC Jorge Heine suggested that his the two countries have invested $189 million

18
ChinaBrief November 22, 2017

to establish a clearing bank in Chile, tied to Chinese activities in Chile’s defense sector
China Construction Bank, as well a $3.5 billion have been minimal. Nonetheless, in June 2015,
currency swap agreement between the cen- Chile’s Minister of Defense Jose Antonio
tral bank of Chile and the People’s Bank of Gomez traveled to the PRC to meet with his
China (Xinhua, June 21, 2016). Chile, for its Chinese counterpart, Chang Wanquan to
part, was one of the first Latin American com- boost defense cooperation (Xinhua, June 24,
panies to join the PRC-sponsored Asia Infra- 2015). A modest number of Chilean officers
structure Investment Bank (AIIB), in May 2017 regularly travel to China for professional mili-
(Asian Infrastructure Investment Bank, May tary education programs, and Chinese arms
13). companies also had a significant presence at
the Exponaval trade show in Santiago (Expo-
Beyond traditional industries, tourist visits by naval 2016).
PRC nationals to Chile are also on the rise. In
2016, almost 23,000 Chinese visited Chile, a In the end, Chile’s relationship with China will
49 percent increase over the previous year, be critical in shaping the dynamics of the
while in the first four months of 2017 almost China relationship with Latin America in gen-
11,000 Chinese tourists visited, representing a eral. As noted previously, Chile’ success in
further 51 percent year-on-year increase (Lun, placing products in the PRC has made its
July 2). practices an important reference for the rest
of the region. Reciprocally, its insistence on
The Chinese ethnic community in Chile re- not bending Chilean laws and contracting
portedly plays an important role in the expan- procedures to accommodate Chinese compa-
sion of such tourism. Although the commu- nies, as occurred in many other countries
nity is relatively small, with an estimated across the region, provides an important indi-
30,000 persons, many are recent arrivals who cation of whether it is possible to attract Chi-
have acquired legal Chilean residency, yet nese investment and maintain a healthy busi-
have retained fluency in Mandarin Chinese or ness relationship within the framework of a
Cantonese and connections in the PRC. These nation’s existing laws and regulations.
Chinese Chileans who reportedly play a key
role in bringing tour groups to Chile from the Chile’s orientation toward China will also be
mainland, and coordinating with Chinese res- important at the regional level. In the wake of
taurants and Mandarin-speaking service pro- the U.S. withdrawal from the Trans-Pacific
viders in Chile to provide a culturally comfort- Partnership (TPP), the support of Chile will be
able experience in Chile for visiting Chinese. instrumental in taking forward a new version
One Chilean tour group operator indicated to of the deal, denoted as “TPP 2”, which would
the author that 70 percent of his business is make an important contribution in defining a
now with the Chinese, although he had done Trans-Pacific commercial regime which ad-
almost no business with them a few years ear- dresses non-tariff barriers to trade, and which
lier. protects the intellectual property of the par-

19
ChinaBrief November 22, 2017

ticipating nations far more than the alterna- China Brief is a bi-weekly journal of infor-
tive “Free Trade Area of the Asia-Pacific” cur- mation and analysis covering Greater China in
rently being promoted by China (Xinhua, No- Eurasia.
vember 3). U.S. policymakers should take note
of what is happening in Chile, which has long China Brief is a publication of The Jamestown
been a friend to the United States, and where Foundation, a private non-profit organization
U.S. political and economic ideals have long based in Washington D.C. and is edited by Pe-
found common ground. ter Wood.

The opinions expressed in China Brief are


The United States continues to have many
friends in the region, yet the deepening of solely those of the authors, and do not neces-
Chile’s relationship with the PRC is generating sarily reflect the views of The Jamestown Foun-
subtle yet significant changes in attitudes, not dation.
only about U.S. policy and requests, but also For comments and questions about China
how Chileans react to parts of the U.S. style
Brief, please contact us at wood@jame-
that they may find distasteful. Chinese activi-
stown.org
ties in Chile, met with traditional Chilean
warmth and efficiency, are an important Interested in contributing to China Brief? Read
wake-up call to take greater stock of how en- our author guidelines here first.
gagement with the PRC is transforming the
region in ways that are increasingly uncom-
fortable for the United States, its global posi-
tion, and the pursuit of its policy agenda.

Dr. Evan Ellis is an analyst of Latin American


economic, political and security issues, with a
research focus on Latin America’s relationships
with China and other actors beyond the region,
including India, Russia and Iran. Dr. Ellis is a
Senior Non-Resident Fellow with the Center for
Strategic and International Studies.

*** *** ***

20