China softens tone in drive for Asia influence

Before his appearance at the World Economic Forum in Davos last January, Xi Jinping’s advisers presented him with four drafts of a speech for the annual gathering of global elites.

According to two people familiar with the Chinese president’s preparations, Mr Xi chose to give the softest version, presenting China as an environmentally friendly champion of globalisation and free trade. He was speaking just days before President Donald Trump celebrated pulling the US out of the Trans-Pacific Partnership, a 12-nation trade pact that pointedly excluded China.

Beijing has since rushed to secure what Chinese officials call the “strategic opportunity” arising from Mr Trump’s election victory, by accelerating efforts to repair long-strained relations with two traditional US allies in the region, the Philippines and Japan. China has offered Manila generous infrastructure deals and taken steps to attract new investment by Japanese multinationals.

The Chinese charm offensive is a carefully calculated response to growing doubts in the region about the reliability of the US, as Beijing seeks to alter the balance of power in east Asia.

Along with Taiwan, which enjoys de facto independence but is regarded by China’s ruling Communist party as a province it will one day reclaim, the Philippine and Japanese archipelagos are critical pieces in a US-aligned “first island chain” that Beijing strategists believe has long been used to contain the Chinese military’s ability to project power in the western Pacific.

“There is a sense in Asia that Trump’s election may portend a dramatic power shift,” says Jake Sullivan, the Democratic former foreign policy adviser to Hillary Clinton and Joe Biden.

The softer approach represents a sharp change in tack for Mr Xi. After nearly a decade of increasingly abrasive treatment of its neighbours, especially over territorial disputes in the South China Sea and East China Sea, the tactics place much more emphasis on diplomacy and economic inducements.

Mr Xi’s efforts to weaken the first island chain complement his new Silk Road initiative, a $900bn project that seeks to strengthen land and sea transport links west towards Southeast Asia, the Middle East, Africa and Europe. Like the Marshall plan, the US-led aid programme that bolstered western European allies after the second world war, China’s attempt to win over the Philippines, Japan and countries along the “Belt and Road” routes involve a mix of military-economic hard and soft power, in which countries gain influence through example.

“The Marshall plan was a great exercise in soft power in that it left a residue of admiration and gratitude to the US in western Europe that had a value,” says Joseph Nye, the Harvard University professor who first articulated the concept of soft power. “But it is also true that our motives weren’t particularly benign — they were partially benign.”

In tandem with China’s growing economic and military influence, Mr Xi has also held up the ruling Communist party’s accomplishments in raising living standards and building infrastructure to win over potential allies.

“Foreigners sometimes see a gap between China’s word and deeds,” says Shi Yinhong, a foreign affairs expert at Renmin University in Beijing. “But the attractiveness of China’s institutions, ideology and values is better than before because of our economic success.”

In the wake of Britain’s decision to leave the EU and Mr Trump’s electoral victory, the Chinese Communist party’s confidence in the attraction of its unique model of state-led capitalism has never been higher.

“Our country’s underlying values hold greater appeal than ever before,” Mr Xi said in October in a speech marking the start of his second term as the party’s general secretary. “[China] offers a new option for other countries and nations who want to speed up their development while preserving their independence.”

However, Beijing’s previously bellicose approach has not been forgotten by officials in Manila and Tokyo — placing limits on Beijing’s efforts at rapprochement. While China’s military has not reclaimed new reefs in the South China Sea in the past year, it has reinforced its existing bases.

Chinese coastguard intrusions in Japanese waters around the contested Senkaku Islands — known as the Diaoyu islands in China — are also continuing. While Japan’s prime minister Shinzo Abe recognises China and Japan need each other economically, he is wary of Beijing securing strategic advances during Mr Trump’s presidency.

“No country in Asia with the possible exception of Cambodia wants Chinese domination or hegemony,” says Mr Sullivan. “On the other hand, they don’t want to have to choose between China and the US.”

According to diplomats involved in discussions between China, the Philippines and Japan, the first signal of a shift in Beijing’s regional policy emerged in the late summer and early autumn of 2016.

As a presidential candidate, Rodrigo Duterte promised to ride a jet ski to islands in the South China Sea that are claimed by the Philippines but controlled by China, such as the Scarborough Shoal. In July 2016, just under a fortnight after Mr Duterte took office, a Hague tribunal ruled that China’s extensive territorial claims across the South China Sea — or West Philippine Sea, as it is known in Manila — had no basis in international law .

But Mr Duterte had also indicated during the campaign that he would be willing to set aside the dispute in return for Chinese infrastructure investment, especially on his home island of Mindanao. “If China builds me a train around Mindanao . . . for the six years that I’ll be president, I’ll shut up [about the ruling],” he said.

In the end, Mr Duterte did just that. In October 2016 he visited Beijing, told Mr Xi that “this is the springtime of our relationship” and returned with $15bn-worth of investment pledges. “There is no sense fighting over a body of water,” he told Chinese state media. “We want to talk about friendship, we want to talk about co-operation and, most of all, we want to talk about business.”

“Duterte is impressed by China’s economic performance, which is an example of its soft power,” says Prof Nye. “But Duterte did not follow up on [the tribunal ruling] because he was afraid of Chinese hard power. The Philippines had already been kicked out of Scarborough Shoal. They were not going to shoot their way back in.”

Back home in Manila the president’s mission to Beijing was a controversial one, given strong anti-China sentiments among sections of the public. “[The Chinese] have neutralised the Philippines much more than they could have imagined,” says Jay Batongbacal at the University of the Philippines’ Institute for Maritime Affairs and Law of the Sea. “Duterte is lionising China — its leadership, its resources.”

While Mr Batongbacal agrees that it made some sense for Manila to try to “maintain equidistance from the major powers”, the new president had done so too rapidly. “In the end, it will lose a lot, particularly its rights and jurisdictions in the South China Sea.”

Antonio Trillanes, an opposition senator, adds: “If we are talking about losing our control in the contested islands, this thing Duterte is doing with China is basically a sellout.”

Others believe the Philippines president is simply playing a weak hand as best he can in the face of a rising China and a US that appears to be in retreat. “Duterte says he is not abandoning Philippine interests but just being rational because Manila is the weaker power,” says an Asian diplomat who has met the president.

The financial incentives underlying this shift towards Beijing are clear for a president who has promised to “build build build” $180bn-worth of roads, railways and other infrastructure. In November, Li Keqiang made his first trip to Manila since becoming Chinese premier almost five years earlier. During his visit, the two governments signed 14 bilateral agreements on defence, infrastructure and finance, including the issuance of renminbi-denominated “Panda” bonds worth Rmb1.4bn ($215m) and underwritten by the Bank of China.

Chinese financial support has become a key part of the Duterte administration’s plans to bolster the Philippine economy — as well as his own legitimacy. When Mr Duterte was facing censure from the Obama administration in the US and the EU for the extrajudicial killings that have defined his administration’s war on drugs, China adopted its traditional posture of saying little about how other countries handle such “internal affairs”.

The Philippines’ trade with China, which was already growing strongly, has surged since Mr Duterte pivoted north. Last year China surpassed Japan as the Philippines’ biggest trading partner for the first time. A Chinese ban on imports of Philippine bananas and pineapples, implemented as bilateral tensions rose in 2012, was lifted just before Mr Duterte visited Beijing.

China’s efforts to improve relations with Japan have followed a similar trajectory over the same time period, although it faces even deeper opposition among public opinion than in the Philippines. In August 2016, tensions around the Senkaku Islands were heightened by the arrival of more than 20 Chinese coast guard vessels, some of them armed — a larger than usual presence in the disputed area.

The stage appeared set for a bruising encounter that month in Tokyo between Japanese officials and Wang Yi, China’s foreign minister, on his first trip to the country since his appointment in March 2013. Bilateral relations between the world’s second and third-largest economies had been rocked in September 2012 by Tokyo’s decision to purchase the Senkakus from their private owner, sparking large anti-Japanese protests across China.

But to Tokyo’s surprise, Mr Wang sought to ease rather than exacerbate tensions during his visit. According to people involved in the discussions, the Chinese government was particularly concerned about flagging Japanese investment. In 2011, Japan was China’s largest single source of foreign investment. Five years later it had dropped to fifth, as Japanese companies directed attention to southeast Asia and India.

“In August [2016] tensions with China were very high,” says one Japanese diplomat. “We had mixed feelings about hosting Wang. But he came with a nuanced message from the Chinese side about engaging Japan economically.”

Mr Wang’s overture was welcomed by Japanese manufacturers and Mr Abe. “From an economic perspective, Japan has rediscovered the China market because of the emergence of middle-class consumers — that was not the case five years ago,” the diplomat adds.

As ties continued to improve, Mr Abe dispatched the secretary-general of the ruling Liberal Democratic party, Toshihiro Nikai, to attend the New Silk Road forum in Beijing last April. And Mr Abe followed up with meetings of his own with Mr Xi and Mr Li at two regional forums in November.

“Both of the meetings, with Xi and Li, were very good,” said one person briefed on the sessions. “They were probably the best Abe has had with them.”

Additional reporting by Robin Harding in Tokyo and Grace Ramos in Manila

South China Sea: talks fail to allay fears over Beijing’s intentions

At a summit in Manila of the Association of Southeast Asian Nations in November, China agreed to begin talks with the regional body on details of a code of conduct for the South China Sea.

Besides China, five Asean member-nations including the Philippines claim parts of the waterway, which apart from its importance to maritime trade contains rich fishing grounds and energy deposits. While no timeframe was given for an agreement on the code’s details, Philippine President Rodrigo Duterte said at the summit that Beijing had said it would “consider really fast-tracking” the process.

However, many in the region are sceptical about China’s declarations and intentions. They see the discussions around the code as a stalling tactic that will allow Beijing to buy time for the balance of power to tip further in its favour. In the four years to 2016, Beijing reclaimed more than 2,000 acres of new land for island bases in the South China Sea and has spent the past year militarising them. In the event of a conflict with the US, analysts note that these facilities would be as vulnerable to attack as an anchored aircraft carrier. Their value lies more in helping Beijing project power across the South China Sea, by refuelling and restocking ships far from the Chinese mainland.

China continues to control fisheries around Scarborough Shoal despite a 2016 Hague tribunal ruling that it belonged to Manila. The shoal lies 260km west of the Philippines and 880km south of China.

“[The ruling] doesn’t change anything at all,” says Jay Batongbacal, director of the Philippines’ Institute for Maritime Affairs and Law of the Sea. “China is now dominating the South China Sea, using these islands and deploying its assets [to conduct] activities in everybody’s seas.”