By: Salman Rafi Sheikh

Chinese President Xi Jinping’s growing economic and regional ambitions have impelled nervous nations as far away as France toward designing a strategy that would limit how far Beijing can extend its reach.

Had Xi’s economic and connectivity vision just been about trade and had it just been a ‘win-win’ situation for all, as the Chinese leadership claimed, the world at large might have happily embraced it. Fortunately or unfortunately, it was never a ‘win-win’ for all; and it can never be, especially when economics and trade start to translate into dominance without equality.

France’s young President Emmanuel Macron has lately been at the forefront of establishing an “Indo-Pacific” alliance, an arrangement of countries (India, Australian, Japan and the US), many of whom also have deep trade relations with China, but who also want to prevent their relationship from turning into overdependence.  

Un pour tous et tous pour un

Coming from Washington, which is in the middle of an incipient trade war with China, Macron said in Australia that France and Australia alongside “fellow democracy India” have “a responsibility to protect the region from ‘hegemony.’”

And before his visits to the US and Australia, Macron visited India in March where India’s Modi had welcomed him with a tweet. Pinpointing what India and France are looking at in terms of their mutual relations, Modi wrote, “Welcome to India @Emmanuel Macron! Your visit will add great strength to the strategic partnership between India and France.”

While India and Australia have their concerns over China’s strategic activity in the Indo-Pacific region, France’s primary interest stems from its territories in the region, where it also controls an Economic Exclusive Zone or more than 2.6 million square kilometers in that ocean.

France has reason to be alarmed at the scale and speed of Chinese commercial activity and the way it is using its aid and debt empire to establish its stranglehold. According to a report of Australia’s Lowy Institute China provided US$2.2 billion in aid, including concessional loans, to Pacific nations from 2006-16 and its trade and diplomatic exchanges are brisk. These nations are already scrambling to collect bits of money to repay China but are failing at it.

Vanuatu submerged in debt

For instance, earlier this year in January, the government of the tiny island nation of Vanuatu, was forced to lift its GST-style consumption tax from 12.5 percent to 15 percent to help service China’s “concessional loans.”

And just as elsewhere in Asia, such as Sri Lanka where the Chinese-built airport and seaport have failed to yield the country any benefit, the Chinese-built National Convention Center in Vanuatu, although a “gift” from China, has massively failed to yield earnings, even not enough to pay its electricity bills, leading Australian International Development Minister Concetta Fierravanti-Wells to accuse China of building “useless buildings,” “roads to ­nowhere” and “white elephants” in the Pacific with a view to drowning these nations in its ocean of debt. 

Tonga, another Pacific nation, is facing the same trouble. While its debt-to-GDP ratio is 44, about 60 percent of its foreign debt is owed to China alone. The money Tonga owes to China was issued between 2006 and 2013 as loans for infrastructural development. When Tonga failed to repay these loans after the expiry of grace period, its request to convert those loans into grants was rejected by China. And while Tonga succeeded in getting another five years, thanks to an IMF intervention, it will have to pay principle and interest at an even higher scale than it was supposed to pay in 2013.

China is thus clearly engaging the Pacific in a way that leaves minimum margin for other countries to maneuver or intervene. Frustration with China in the Pacific is thus building. And countries like France, India and Australia are seemingly aiming to build and expand an “Indo-Pacific” alliance called ‘the Quad’ to prevent absolute Chinese hegemony.

While these countries have deep economic relations with China, their rivalry is an open secret and they are looking to limit Chinese hegemony by building upon the anti-China mood, which is certainly taking shape not just in the Pacific, but in other Asian lands as well.

In Malaysia for instance, which has seen extensive Chinese activity on its land, anti-China mood is more than visible. In fact, one of the major points on which its former and future premier, Mahathir Muhammad, has built his astonishing election campaign is reviewing Chinese investment.

His objections are not different from what many in Pakistan, which is obligated to repay billions in debt over its Gwardar port, have said about the nature of Chinese activity. In an interview with local media in April, Mahathir said that “Chinese investment was welcome if companies set up operations in Malaysia, employed locals and brought in capital and technology to the country. This was not the case now,” adding that there is an urgent need to review it because Malaysia was gaining “nothing from the investment.”

There is thus ample space for China’s competitors to re-shape regional geo-economics, taking it away from the shadows of China’s massive debt empire.  And while a prevailing assumption is that such an alliance might not be able to succeed because of China’s economic relations with almost every country in the region including Australia, India and Japan, the fact that such an alliance is still taking shape and that it has gathered pace as well speaks volumes about the extent to which these countries are pre-occupied with the imperative of re-shaping regional economic narratives, and establish institutional frameworks that can force China into following a transparent and rule-based system of economic relations.

Also, let’s not forget that while many competing countries have economic relations with China, these countries also equally have political and economic relations among themselves. As such, even during Macron’s visit to Australia, talks predominantly focused on expanding mutual economic and defense co-operation, including the desire to expedite negotiations on EU-Australia free trade agreement; hence, the question: will such an economic integration not cause China any trouble?

Salman Rafi Sheikh is a regular contributor to Asia Sentinel