September 15, 2013

China as a Driving Force of the Modern World. Part 1. China's geopolitical compass

China's geopolitical compass

Developing dynamically, China has recently begun to assume the role of a new global center of power. Thus, in 2012 China was second in the world in terms of GDP —8 trillion US dollars (the first was the USA with 16 trillion US dollars). At this, the volume of foreign trade of China is 3.87 trillion US dollars which is by 3.82 trillion US dollars higher than that of the USA.

China was second in the world in terms of GDP
China was second in the world in terms of GDP

Despite the planned reduction of the rate of the economic development of the country economic development by the leadership of the PRC, in the first half of 2013 the GDP growth of China made 7.6 %, which still is the highest figure in the world (in absolute terms, China's GDP for the six months of this year was over 4.2 trillion US dollars.




The aircraft carrier “Liaoning” in the port of Dalian
The aircraft carrier “Liaoning”
in the port of Dalian

This enables China to devote significant resources to the development of the country's security component, which, according to various estimates, in 2012 reached the amount of 100 to 180 billion US dollars. As a result, today the People's Liberation Army of China (PLA) has one of the greatest potentials in the world and in fact is second only after the US Armed Forces. Thus, the size of the PLA is 2 million 250 thousand people, and is armed with modern types of military equipment, including long-range ground-based and sea-based nuclear missile systems, means for space reconnaissance, control and communications, nuclear submarines and surface ships of the main classes, strike, special (including long-range radar detection) and military transport aircraft, as well as the full range of army weapons, including precision-guidedsystems.

In general, all this leads to a number of significant changes at both, the global and regional levels.

As a result, there appeared a new world order system with two main poles, namely the USA and China. Note that, unlike the former bipolar world during the “Cold War”, in which the USA and the USSR had been globally opposed, the United States of America and the People's Republic of China are trying to build their relations on the principles of partnership and compromise solutions to existing problems.

Meeting of the President of China, General Secretary of the Communist Party of China Xi Jinping and U.S. President Barack Obama
Meeting of the President of China, General Secretary of the Communist Party of China Xi Jinping and U.S. President Barack Obama

In particular, to this testifies the meeting of the Head of China — General Secretary of the Communist Party of China Xi Jinping with the U.S. President Barack Obama in June this year in Washington, at which were determined the principles of a new model of the USA — China relations: the way of reaching a consensus on most important aspects of international relations.

Following the talks between Xi Jinping and B. Obama, both sides have given up confrontation and decided to intensify and expand the dialogue at all levels. Leaders of the United States and China, in particular, have expressed their willingness to coordinate macroeconomic policies of their countries, to strengthen the USA — China cooperation in the military and security spheres, as the basis for security in the world and region, as well as to establish rules of conduct in cyberspace and to cooperate in settling problems of the Korean Peninsula and the Middle East.

The state councilor, Minister of National Defense of the People's Republic of China Chang Wanquan at the meeting in the Pentagon with his colleague Chuck Hagel
The state councilor, Minister of National Defense of the People's Republic of China Chang Wanquan at the meeting in the Pentagon with his colleague Chuck Hagel discussed  the USA-China relations, regional problems, and cyber-security.The Ministers agreed on cooperation between the two countries in the military sphere

All these issues have been elaborated during the 5th meeting of the USA — China Strategic and Economic Dialogue in July this year in Washington, as well as during the visit to the USA of the Secretary of Defense of China Chang Wanquan. As a result of these measures, the parties agreed to strengthen cooperation in the financial, commercial and economic fields and security. In particular, it is expected to carry out systematic consultations between China and USA on economic and security issues, to exchange information on the development of economic systems and to conduct joint military trainings, as well as to counter-act terrorism and maritime piracy together.

In general, the convergence of the USA and China helps strengthening the strategic security in the world and the balanced development of the world economy, and, in particular, of national economies of both the countries. However, significant challenges in USA — China relations are contradictions in their influence in the Asia — Pacific region, in their views on settling conflicts in the Middle East, as well as on access to markets and resources of Africa and Latin America.

China, seeking to strengthen its positions in the world and trying to defend its national interests, has intensified its participation in various international organizations. For example, China is an active member of the UN, “Great Twenty“, Shanghai Cooperation Organization, a group of BRICS, ASEAN, APEC and other international organizations.

The main goal of the PRC in these organizations is improving the effectiveness of the UN in solving international security problems; restoring global economic stability; reforming the global financial system on the basis of on a new, just financial approach; protection of interests of developing countries; ensuring global security in the military, energy, food, environmental and other important spheres; development of science and technology partnerships and deepening international cooperation in the field of high technologies; promotion of humanitarian exchange between countries (including the development of cooperation in culture, tourism and sport, education and health).

At the same time, within the framework of bilateral and multilateral cooperation with other countries, China has taken a leading position in the global financial and economic system. Today, China is the world's largest holder of foreign currency and other assets. In particular, China has acquired the US assets worth about 2 trillion US dollars.

The dynamics of foreign direct investments — main areas and regions
The dynamics of foreign direct investments — main area
and regions

Besides, China is a major investor into economies of other countries and consumer of foreign investments. Thus, in 2012, China invested into various overseas projects at least 80 billion US dollars. A volume of foreign investments into the Chinese economy totaled nearly 100 billion US dollars.

Consequently, in the world financial and economic circles gets more and more spread the opinion about the wisdom of making the Chinese Yuan the world's second reserve currency on par with the US dollar.

It should be noted that the strategic impact of China on the global economy is due to: an increase in the scale of shale gas production in the country, which will lead to a sharp drop in world prices for gas (total reserves of shale gas in China are 1300 trillion cubic meters); strengthening the dominant role of China in exploration of resources and production of rare earth metals; China's becoming a world leader in production of gold; the center of the automobile industry's moving from the USA to China; the dynamic growth of China's share of consumption of the world's food, water, energy, mineral and other resources.

Thanks to its potential, China is trying to strengthen its own positions in the regions of the world that are important for it. First of all it concerns the Asia-Pacific Region (APR), which is particularly important for China. Thus, the Chinese policy in the APR is aimed at strengthening the role of China as a regional leader and integration center of the region, primarily by ensuring economic and military superiority of China in the region, deepening alliance with partners, creating a security zone near the Chinese border, as well as settling territorial and other conflicts with neighboring countries to its own favor (in particular, in relation to disputed islands in the South-China and East-China Seas).

In general China achieves this goal by developing economic ties with Asia-Pacific countries (first of all, by investing into their economies), and by increasing the Chinese military presence in the region.

Thus, the total Chinese investment in the economies of the Asia-Pacific region is at least 130 billion dollars. USA. The main Chinese partners are Australia, Indonesia, Philippines, Vietnam, Malaysia, India, Japan, Laos, South Korea and Brunei.

Confrontation between the USA and China in the Pacific
Confrontation between the USA and China in the Pacific

As part of the national military policy in the region, China has been building up a network of military bases in the South-Eastern parts of the country and strengthening the capacity of the Chinese Navy in order to control coastal seas and the way into the Pacific and Indian Oceans. In this regard, special attention is paid to the creation of a modern aircraft carrier fleet as well as of long-range aviation.

In general, these measures contribute to the dominance of Chinese products in the Asia-Pacific region and develop it economically. But this region is increasingly becoming a militarized arena where increase chances of conflict due to the opposition of China's and the United States' and several other countries' interests.

Another China's priority is the development of its cooperation with Russia and countries of neighboring regions — South-Eastern and Central Asia. Thus, China and Russia are implementing a number of major projects for development natural resources of the Far East and Eastern Siberia of the Russian Federation. Do not forget that China is a major investor into Russia's industry, agriculture and food industry, transport and communications and so on. Besides, China supplies Russia with consumer goods and high-tech products, showing at this a great interest to the defense, aerospace and other advanced sectors of Russian industry.

The dynamics of trade turnover between Russia and China

The dynamics of trade turnover between Russia and China

All this causes a permanent increase in trade between the two countries. In particular, in 2012, the mentioned index increased by 11 %, having reached the level of 88.2 billion US dollars. According to the agreement between the parties, by 2015 the trade turnover between China and Russia is supposed to increase to 100 billion US dollars, and in 2020 — to 200 billion US dollars.

The strategic nature of relations between the two sides was reaffirmed during President Xi Jinping's visit to Russia in March this year (his first foreign trip in office) and his meeting with President V. Putin. The leaders of the two countries signed a package of agreements on further cooperation in the energy and banking sectors, including construction of a gas pipeline from Russia to China, as well as joint construction of a refinery and petrochemical plant in China's Tianjin. Besides, there is an agreement on Chinese companies investing 2 billion US dollars into the development of coal mining in Eastern Siberia.

Prospects of the development of cooperation in energy sphere were also discussed at the summit of “Big Twenty” on the 5th-6th September 2013 in St. Petersburg in the negotiations of the Head of the Russian “Gazprom” O. Miller with the Head of the Chinese CNPC company Zhou Tszipin. The parties signed an interim agreement on the terms of Russian gas supplies to China (except the main question about its price).

There is increasing interaction between China and Russia within the framework of international organizations (first of all the UN, SCO and BRICS) on political, economic and security issues, including the settlement of the situation in the Middle East and the Korean Peninsula. Also active is cooperation of the parties in military matters, in particular in joint anti-terrorism and peacemaking trainings.

If you pay attention to the problematic aspects in the relations of the parties, you can't help noticing that Russia is concerned about the increasing influence and strengthening of the positions of China in the Far East and Eastern Siberian regions of the Russian Federation as well as about the growing imbalance in trade between the two countries (an increase in the supply of high-tech Chinese products to Russia, which already exceeds the volume of Russian military equipment deliveries to China ).

Forecast of the Organization for Economic Cooperation and Development ( OECD )
Forecast of the Organization for Economic Cooperation and Development ( OECD ): in 2060 the share of China and India in the global GDP will be higher than that of all the 34 countries which are now in the OECD

The main partner of China in South-East Asia is India. Despite the rivalry for influence in the region and the presence of some territorial issues, the two countries keep consistently developing their relations in trade and economic spheres.

China is one of the largest trading partners of India. For example, the bilateral trade volume is about 80 billion US dollars. USA. Further increase of this indicator will be caused by the started in 2011 China-India strategic dialogue that promises to bring the relations of the parties to a new level. Thus, over the next few years trade between China and India is supposed to reach100 billion US dollars annually.

Besides, is developing cooperation in the military sphere, which was officially launched in 2006 under the relevant memorandum between the Defense Departments of the two countries.

China has been strengthening its ties with countries of Central Asia, because they are important to it as partners in implementation of joint energy projects as well as plans to build their own model of the so-called new “Silk Road” (as opposed to a similar initiative of the USA) — namely, a corridor from Asia- Pacific Region to Europe through Central Asia.

Like in other cases, as the main tool to achieve its goals PRC considers development of economic, trade and investment cooperation with Central Asian countries. Favorable basis for this appears through consistent and prudent policy of China, which managed to build a conflict-free relationship with its partners in Central Asia, as well as to eliminate existing contradictions, particularly on border issues.


An important step in deepening ties between China and Central Asian countries was the Head of China Xi Jinping's visit to the region in early September. The main results of the negotiations at the highest state level are as follows:


China and Turkmenistan promise to strengthen their relations
China and Turkmenistan promise to strengthen their relations. Zhou Yongkang, a member of the Standing Committee of the Political Bureau of the CPC, at the meeting with President of Turkmenistan Gurbanguly Berdimuhamedov

in Turkmenistan — strategic partnership of the sides in the energy sector has deepened. The leaders of China and Turkmenistan attended the ceremony, with which began commercial operation of the Galkynysh gas field that is being developed with participation of the Chinese side (this field is in second place as for gas reserves; the Chinese investment is 8 billion US dollars). Between Turkmen company “Turkmengaz” and Chinese CNPC has been signed a contract to increase the supply of Turkmen gas to China by 25 billion cubic meters annually — up to 65 billion cubic meters of gas per year (40% of gas imports to China), as well as to construct the fourth branch of the gas pipeline Turkmenistan-Uzbekistan- Kazakhstan-China;


China and Uzbekistan have signed an agreement for 15 billion US dollars. Chinese President Xi Jinping and Uzbek President Islam Karimov
China and Uzbekistan have signed an agreement for 15 billion US dollars. Chinese President Xi Jinping and Uzbek President Islam Karimov

in Uzbekistan — have been specified areas of cooperation between the two countries over the next 10 years under the “Declaration on Establishment of Strategic Partnership between China and the Republic of Uzbekistan” (signed in June 2012). In particular, it provides enhanced cooperation of the sides within the SCO, increasing the volume of bilateral trade and Uzbekistan's participation in several energy transportation projects that are of strategic importance to both sides. This concerns especially the expansion of throughput capacity of the pipeline Turkmenistan-Uzbekistan-Kazakhstan-China and the construction of the railway China-Kyrgyzstan-Uzbekistan-Kazakhstan. There has been planned an increase in Chinese investments into the Uzbek economy (today they are 4.6 billion US dollars);


Китай инвестирует в Киргизию $3 миллиарда
China invests in Kyrgyzstan 3 billion US dollars. Chinese President Xi Jinping and the President of the Kyrgyz Republic Almazbek Atambayev

in Kyrgyzstan - an agreement has been signed on China to finance a number of key projects determined in the “National Strategy for Sustainable Development of Kyrgyzstan to 2017”,  particularly on building infrastructure of domestic and export energy supply and on development of agriculture, transport and communications, industrial and mining sectors of the Kyrgyz economy. In terms of implementation of transportation projects, Kyrgyzstan has agreed to accelerate the development of the project of construction of the Kyrgyz section of the China-Kyrgyzstan-Uzbekistan-Kazakhstan railway. The parties have also discussed the possibility of establishing a modern international freight transport nodal center at the basis of Manas International Center after the withdrawal of ISAF Coalition Forces from Afghanistan;


China and Kazakhstan are not only neighbors, they share a strong friendship and strong strategic partnership
China and Kazakhstan are not only neighbors, they share a strong friendship and strong strategic partnership. Meeting of President Xi Jinping with President of Kazakhstan Nursultan Nazarbayev

in Kazakhstan — a “Joint Declaration on Further Deepening the Comprehensive Strategic Partnership between Kazakhstan and China” has been signed.  The main directions of this work have been determined further cooperation in the fields of energy, agriculture, transport, communications, high technologies, telecommunications, chemical industry, as well as bilateral trade. In particular, the parties have agreed to increase bilateral trade to 40 billion US dollars in 2015. The sides have stated about their being ready to expand mutual investments and to increase the volume of oil supplies from Kazakhstan to China to 20 million tons per year. For this purpose, they will expand cooperation in implementation of projects of exploration and development of oil and gas fields in Kazakhstan, and create new capacities for oil refining. The two countries also are going to activate their cooperation in development of peaceful nuclear energy.

Announcing the results of his visit to Central Asia in his speech at Kazakh Nazarbayev University, the leader of China invited the countries of the region to create a new model of cooperation in the political, financial and economic spheres, by developing political contacts, building a unified transport network, as well as by development of their trade and economic ties.

According to experts, having strengthened its positions in Central Asia in such a way, China will create conditions for pushing out Russia and the USA from the region as its main geopolitical and economic rivals.