Beijing weighing up costs to avoid strategic overdraft

By Shen Dingli Source:Global Times Published: 2016/10/26 18:58:39

Illustration: Liu Rui/GT

Illustration: Liu Rui/GT

Will there be a strategic overdraft in China? To some extent, there could be. But it's under control for the moment. Overdraft means using wealth or strength beyond one's capacity to sustain. Even if Beijing is putting an increasing amount of effort into a wide range of fields, nothing has happened yet which it hasn't been able to manage.

For instance, after the bitter Sino-Japanese row over the Diaoyu Islands, China established an Air Defense Identification Zone in the East China Sea in 2013. The US and Japan curbed the movement of their civilian aircraft in the zone, though not their military ones. It means that China's push partly worked.

Over the past two years, Beijing has built seven artificial islands on reefs and islets in the South China Sea, which has led to disputes with the Philippines and Vietnam. However, when Vietnamese Prime Minister Nguyen Xuan Phuc visited China last month, he did not over-elaborate on the issue. Indeed Philippine President Rodrigo Duterte didn't dwell on the issue during his visit to China last week either. At the moment, both sides agree to work together, be it in anti-drug trafficking or infrastructure construction. It shows that divergences over the South China Sea need not strain overall relations.

Beijing could help mend its relations with Manila in a number of ways: by letting Philippine fishermen work near Huangyan Island; by including it in the One Belt and One Road initiative; or by lifting the import ban on some of its fruit and seafood. Yet if Beijing continues its reclamation at Huangyan Island and Ren'ai Reef, Manila would likely turn to the US, and strategic overdraft could occur at any time.

After years of simultaneously promoting military and economic strategies, concerns have been raised that China might overspend. While that would be risky, it's still controllable. An overdraft is similar to what's happening in China's mega cities. More people are spending their savings on real estate. As a result, there is more investment in construction and it's a boost for related industries. Nevertheless, there should be boundaries. If the majority of people aren't financially capable of getting on the property ladder, but purchase nonetheless, they are likely to overdraw and their homes might end up being a half-backed building. Therefore, it is very important to control the risk, be it in real estate or foreign policy.

Developing the economy should be a key strategy for the moment. After all, a stable economy is the basis of national security.

In the meantime, Beijing has started to adjust its strategies. Its relations with some of its neighbors seem to be strained in recent years. Yet it reached a consensus to further promote its comprehensive strategic cooperative partnership with Vietnam last month. A new beginning in China-Philippines relations was established with Duterte's visit. If their relations remain stable, China's reach-out can be strengthened in the region.

Another case can also illustrate the adjustment. In 2014, shortly after Haiyang Shiyou (HYSY) 981 - an oil platform owned and operated by China National Offshore Oil Corporation - started its 100-day exploration operation near Zhongjian Island, an island also claimed by Vietnam, the latter sent dozens of vessels to hit the rig. In the end, HYSY 981 withdrew some 30 days earlier than planned. It explained it had accomplished the job ahead of schedule, but hopefully there was some political reconciliation involved in the episode. It seemed that while China pushed the envelope, it was nevertheless ready to act within a limit.

That said, China's strategies are certainly not risk-free, and its exposure could grow under certain circumstances. However, in the meantime, it will also weigh the costs and take them all into consideration.

The author is Associate Dean of the Institute of International Studies at Fudan University.

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