CHINA'S TRANSITION TO THE GLOBAL ECONOMY INTERNATIONALIZATION IN THE PERSPECTIVE OF CHINA'S DEVELOPMENT MODEL AND REGIONAL DYNAMICS

CHINA'S TRANSITION TO THE GLOBAL ECONOMY:

INTERNATIONALIZATION IN THE PERSPECTIVE OF CHINA'S

DEVELOPMENT MODEL AND REGIONAL DYNAMICS

Introduction

In recent decades, China has become an influential country in the global political order. As an

advanced industrialized country, China's foreign policy dominates several regions with a very

proactive strategy in various African and Asian regions. The increase in proactive foreign

policy indicates that China's interests and power are also increasing (Wang, 2005). The

impetus for increased political activity in the global order occurred after the Cold War with

building various partnerships (Cheng, 2002), China was able to change the political and

economic order of the world by emerging as one of the influential countries among other

Major Power countries. Political and economic power became the source of international

politics and successfully challenged the dominance of western countries on several continents.

In particular, China's development has increased significantly which can encourage western

countries to begin to recognize China's presence in several regions. In Africa, China's

increased foreign investment has begun to fundamentally reshape the physical and political

landscape of the continent (Tiboris 2019). Chinese aid and forms of economic engagement are

sharply increasing in Africa and have the potential to become the continent's largest trading

partner, surpassing the United Kingdom and the United States. In South and Southeast Asia,

China initiated the establishment of the Belt and Road development cooperation and has

joined several strategic partnerships with regional organizations.

China's rise in foreign policy raises many questions, can China's activities pose a

threat to developing countries? How is the international system organized in the presence of

China and the influence of the United States, Japan and India? Pollack and Yang (1998)

identify the ambitions of military modernization by China's security elites, and the

pervasiveness of regional security norms, as well as the understanding of potential rivalries

can produce anxiety for small states. Some scholars conclude that China's foreign policy tends

to be assertive (Swaine and Fravel 2011; Johnston 2013). China pursues a tough, often

coercive, military and diplomatic policy in some cases (Johnston 2013), while in some issues

China appears to be very much trying to build cooperation in development. Other observers

confirm that China's rise is a peaceful one (Qingguo 2005; Zhang 2015; Wang 2005). To

strengthen the claim of peaceful rise, China published two foreign policy white papers on the

theme of peaceful development, in 2005 and 2011 respectively, to officially declare its

commitment to foreign policy as Peaceful Development (Information Office of the State

Council of PRC).

The debate leads the author in the process of understanding the categorization of the

main objectives of China's foreign policy in an international perspective. Furthermore, this

article aims to observe the internationalization of China's foreign policy in several regional

studies by forming a possible pattern in the development initiated by China. By observing the

pattern of foreign policy in some regional This paper then looks for patterns in international

development initiated by China.

The process of rapid economic growth pushing China to become the second largest

economy in the world has clearly demonstrated placing economic development as a key part of

development. However, the increasing external and social challenges justify China's activities

in International Development through the go beyond the borders policy. The

conceptualization of China's development in this paper seeks to observe China's development

internationally using international institutionalization features through economic development

instruments. The author's observations of development practices in several regions are linked

to economic interests.

Analysis Framework

China's rise raises economic and environmental challenges for the global system (Fu, 2012).

With its rapid economic growth and deep integration into the global system is the best way to

sustain its progress. Chinese leaders see the first 20 years of the 21st century as a crucial

period that can be a strategic opportunity for China, under the leadership of Hu Jintao has

chosen a new path towards peaceful rise in the concept of 'Peaceful Rise' (Li and Worm,

2011). China's vast market and business potential, China offers the world opportunities for

trade and investment, thus generating wealth. Economic challenges include increased

competition from exports of goods and services and imports of natural resources (Fu, 2012).

An 'adaptive' approach to enhance China's leadership in globalization. The increment is an

indication that China has moved away from the 'open door policy' economic system towards a

transition to a broader global scope.

Some thinkers conclude that the transition to a global system is a package of openness

policies carried out in economic reform. According to Berslin (2013), China's economic

reform process is divided into four stages, namely: unlocking the door, from permitting to

facilitating, 1986-92, accelerating opening, 1992-9, and joining the WTO 1999. The first

phase was to open interaction with the international economy by opening SEZs which

triggered the gradual opening of new investment areas. The second phase was characterized

by the emergence of the 'twenty-two regulations' that created a more favorable environment

for investment favorable to foreign investors including lower costs for labor and rent, tax

rebates for exporters, and allowing foreign companies to convert limited profits earned in

RMB into foreign exchange and repatriate profits. While the third phase is accelerated

openness by establishing a liberal international export regime while maintaining a relatively

closed and protected domestic trade regime to support production, profits, and labor. The

fourth phase was joining the WTO as a change of orientation to transition into a Free Trade

regime.

China's transition into the global economy and development does not refer to the

western approach. This transition strategy is marked by China's joining the WTO which aims

as China's commitment to international development. Of course, this is inseparable from the

belief that China has a huge economic interest in expanding its trade. China's transition into

the international economy is characterized by China's increasing integration in regimes such

as the ASEAN Free Trade Area, BRICS, and others. An important dimension of the transition

process is that Beijing is expanding its trade relations with various countries, either bilaterally

or multilaterally, while maintaining its domestic economic stability. The transition strategy

can also be seen by the number of strategic partnerships built by China (Asgarkhani,

Ghahramani, and Hajat 2019).

One strategy in this transition is to be largely labor-intensive especially in the

technological intensity of its exports. In 2007, 30 percent of China's manufacturing exports

were classified as high-tech in the UNCTAD trade database (Fu, 2012). This is partly because

most of its exports are based on components imported from more developed Asian neighbors

such as Japan. In absolute volume, in 2007 China surpassed the United States in merchandise

exports, and in 2009 surpassed Germany to become the world's largest merchandise exporter

(Fu, 2012).

China's integration has certain freedoms and differs from the approach of other

countries in its planned economic transformation and market economy that is not forced by

political crises (Perkins 1994; Webber 2014). An important element of China's development

is the regulation of marketization and trade or investment flows. An important indicator in

China's economy in terms of the opening up of 'Duiwai Kaifang' is how China should let open

the door to other countries and how China goes out by promoting 'Made in China' products -

exports - to earn foreign currency. The transition from the domestic growth process to

'outward looking' (Chen and Wolf 2001) observed China's growth where in the reform is a

continuous process, so that economic growth continues. To maintain economic sustainability

and political-economic goals, the Belt and Road Initiative is the main instrument in this

transition. In addition, to keep this project running, China also continues to promote financial

formation to facilitate access to capital for countries included in the Belt and Road mega

project.

Research Methods

The method used in this research is a qualitative method with an analytical narrative

approach. The analytical narrative approach aims to find conclusions from existing narratives

in the development and dynamics of phenomena in international relations using theory, so that

this research is directed at narratives in the form of regional studies of China's political

economy implementation. Meanwhile, data sources are obtained from literature studies and

documents related to the discussion. data collection techniques using literature review by

looking for data sources related to the subject in the study. Data analysis techniques in this

study begin with data collection, data presentation, data adjustment with related literature,

drawing conclusions.

Discussion

International Development Project Ideas

China's foreign policy content includes innovations and ideas on how China becomes a

leading country in Asia in the short and long term. Where in the short term the priority

achievements of the Communist Party of China (CCP) in 2020 are complete development of a

society that can prosper society (xiaokang shehui), and the long term is reached in 2049, to

realize a modern socialist country that is prosperous, strong, democratic, civilized and

harmonious (Callahan, 2016). According to the Communist Party (Roy, 2019), China is

basically a peace-loving, defense-oriented, non-expansionist country that is harmless in some

situations. In addition, Xi Jinping also mentioned 'No matter how strong its economy grows,

China will never seek hegemony, expansion, or sphere of influence' (Roy, 2019). However,

China's foreign policy contradicts this statement, with considerable military power capable of

confrontation in the Southeast Asia region and claiming the South China Sea area as its

territory. This assertive action explains that determination to win in border disputes, through

the use of military force is necessary (Roy, 2019).

The Xi Jinping administration has focused on peripheral diplomacy, which is used for

relationship management in its periphery due to rising tensions with neighboring countries:

especially in maritime disputes in the East and South China Seas (Callahan, 2016;

Asgarkhani, Ghahramani, and Hajat 2019). Xi argued that China needs to build its relations

with neighbors according to the principles of friendship, sincerity, and reciprocity. According

to Callahan (2016) BRI is one of the initiatives driven by two important events, namely the

economic slowdown after the 2008 crisis and the US pivot strategy in Asia. This is in line

with Wang's research which states that the impact of the 2008 global financial crisis and after

experiencing high-speed growth, China's economy has slowed down since 2012 and entered a

state of normal growth (Trading Economic, 2020). In addition, there are great challenges for

China in dealing with the international politics of the United States in the Asia Pacific with

the presence of the Trans Pacific Partnership (TPP) and the US Pivot to Asia policy. China

regards both strategies as a shift in US interests towards East Asia, as well as a strengthening

of bilateral security arrangements, raising China's concerns about long-term threats to its

sovereignty. The presence of the US in Asia is a backdrop to China's abandonment of major

geopolitical interests in the South and East China Seas, so the BRI in not to challenge the US

in the East and South China Seas. Instead, the BRI will work to build strategic mutual trust

because the US and China do have many common interests in Eurasia (Callahan, 2016).

Xi Jinping, decided to pursue a continental and maritime strategy rather than a maritime one

pursuing a debate of interests with the US. BRI asserts that China can use comparative

advantage not only to help other countries, but also to overcome the overcapacity problem of

its infrastructure construction industry and also allows China to diversify its foreign exchange

reserve investment (Callahan, 2016). Of course, continental projects in line with peripheral

diplomacy are very much in place with the presence of BRI as a political and economic tool.

This is supported by the interests of domestic energy needs to stimulate industrial viability in

China, even China's dependence on imported energy has surpassed the United States, and

faces major challenges to ensure energy supply (Yong, 2016).

Based on this explanation, the BRI was born from two concurrent events, one economic and

one strategic. After Xi Jinping ascended to the position of Vice President of the PRC in March

2008, China began to feel the effects of the global financial crisis. In 2010, the Obama

administration announced its Asia Pacific pivot policy. These two events caused China's elite

to reassess its economic development prospects and external strategic environment. BRI can

be understood as an attempt to respond to increasing challenges in both domains. In line with

Callahan's research according to Lily Ouyang, China's motivation for initiating the Belt and

Road is motivated by; Enhancing security in Eurasia, Adjustment to the US Asia Pivot

strategy, Acquiring strategically important natural resources and trade routes and establishing

a Community of Interest under Chinese leadership (Ouyang 2017).

Called 'The Miracle of Asia', during its rise, China has not only improved domestic

conditions but has also started active foreign policies, such as China Foreign Aid to Africa.

Foreign aid to Africa is a very strategic first step to actively engage in international politics,

thus gaining many achievements in several aspects (Addis and Zuping, 2018: 357-358),

especially the fulfillment of resource and energy needs. The interest in Africa was then

followed up with various other very active foreign policies.

In 2003, China's State Council Institution declared its first energy program that

promised to provide diplomatic and military support and guarantees to oil companies for

overseas business activities (Wilson 2017). In addition, after making a larger amount of state-

funded foreign investment, it engaged in in a more active resource diplomacy program. But

this only shows that the government has pushed the strategy further. The present skepticism

towards China's leadership in development in Africa affects the subsequent political

contestation of development. The China-Africa relationship built through foreign aid becomes

a small miniature for taking a big interest in international interactions. China is involved in

several multilateral security tensions in the Asia-Pacific region, particularly the currently

escalating maritime territorial disputes in the East and South China Seas (Wilson 2017).

With an increasing international importance that is directly proportional to the

increasing need for resources and energy, China has again taken a big step by initiating trade

facilitation development, by promoting the Belt and Road Initiative (BRI). BRI has become a

grand geopolitical strategy in international politics, seeing that the development initiative

covers various regions with very complex international political interactions (Blanchard and

Flint, 2017). This development contradicts the repressive policies towards its neighbors,

where it is present as a state that provides assistance by establishing partnerships in various

regions.

In the South Asia region, including the Indian Ocean, BRI faces geopolitical and

geostrategic challenges. China's presence in South Asia has implications for India-China

rivalry which tends to compete for influence in the region. India's concern is with the BRI

project more broadly, a Chinese-funded initiative to expand strategic influence. Both

countries have claimed regional power status, i.e. a dominant position with vested interests.

India has used bilateral and multilateral strategies to pursue its regional leadership role in

South Asia (Wagner 2016). The BRI makes India-China rivalry even more complex with

China's growing influence in South Asia raising the question of 'who is the regional power'.

In addition, the funding of projects in the sub-region is directly proportional to the

needs of Asian countries seeking funds for infrastructure development, but there is a suspicion

that the acceptance of such projects is done under China's geopolitical influence. BRI needs to

debate whether China's activities in the region support its own economic development and

how far it pursues a policy of domination and 'encirclement' of third powers from influential

countries in some regions. Amidst the emergence of In order to smooth out these initiatives,

China under the Xi Jinping administration has focused on peripheral diplomacy, which is

used for managing relations in its periphery due to increasing tensions with neighboring

countries: especially in maritime disputes in the East and South China Seas (Callahan, 2016).

The promotion of BRI is interesting to study considering that China, in defending its energy

interests, uses the tools of confrontation of disputed territories and provides guarantees of

military assistance with its partners and simultaneously uses a partnership pattern in

development.

Financial Institution Instrument

Asian Infrastructure Investment Bank (AIIB), AIIB was established in October 2013, during

consecutive visits to countries in Southeast Asia, Chinese president Xi Jinping and Premier Li

Keqiang put forward a proposal to establish the Asia Infrastructure Investment Bank. This

proposal received widespread support. On October 24, 2014, finance ministers and official

representatives from the first 21 founding member countries, including China, India, Thailand

and Kazakhstan, signed an agreement in Beijing, and jointly decided to establish the Asia

Infrastructure Investment Bank (AIIB) to be an open, intergovernmental and multilateral

financial institution. Its operations will follow the principles of openness, transparency and

efficiency, and it mainly aims to support infrastructure development in Asian countries.

Despite adhering to the principles of transparency, AIIB remains a multilateral bank

dominated by China, where China has a total voting share of more than 26% due to its

contribution of 29.78 billion US Dollars (Hong, 2017). China is the largest investor in the

AIIB and its largest shareholder. As written in the AOA, at least 75% of the total votes are

required to amend the AOA, adjust member share capital, increase the bank's authorized

capital and make other major changes. As such, China has a de facto veto on the bank. The

Asian Infrastructure Investment Bank (AIIB) and the Belt and Road Initiative are likely to

reshape the economic geography of the affected regions and thus exert influence on the global

economic landscape.

To encourage increased investment China established the Silk Road Fund which is a

Chinese government-owned enterprise in countries along the BRI project. The Chinese

government pledged US$40 billion for the establishment of the fund investment established

on December 29, 2014 (Das, 2017). In addition, another institution involved in China's

development and projects is the China Export-Import Bank. It is China's state-owned bank

that took the initiative in financing the BRI to compensate. As of September 2015, it has

financed 2057 projects in 49 countries. 10 China Development Bank has also financed more

than 400 projects in 48 countries as of August 2015 (Aoyama, 2016).

The Belt and Road Forum (BRF), is a platform for countries to consult. The

establishment of the BRF platform helps achieve reasonable and efficient use of public

products, so as to achieve communication, consultation and coordination through the BRF and

reduce transaction costs and improve cooperation efficiency. The forum has a great purpose in

planning the overall framework for building the Belt and Road, developing relevant policies

and action plans, negotiating and solving major problems arising in their joint development,

so as to improve the efficiency of cooperation.

Political Dynamics in the Asia Pacific Region

The perception of threats is a way out to strengthen China's position by building political

closeness with partner countries to ward off threats both external and internal scopes. China's

major threat is mainly to dispel the United States strategy in the Asia Pacific with its 'Look

East' policy. China's concerns about US military activities with neighboring countries and

limiting the further movement of the United States in the Asia Pacific (Roy, 2019). These

perceptions result in China's greater projection of the expansion of influence to counteract

tensions in the region. The expansion of influence not only makes India as China's rival need

to look at geopolitical or even geostrategic interests, because some sources claim military

partnerships occur in South Asia. The US Department of Defense, claims that:

Reports suggest that China plans to build military bases, ports and other facilities in

targeted areas to achieve strategic objectives (Athwal 2008). These indications are reinforced

by the data that South Asia is now is China's arms export market where in 2015 Pakistan

received 35% of arms exports, and Bangladesh 20% (Freeman, 2018). Therefore, the

geostrategy related to the approach to increasing military cooperation, especially in the Indian

Ocean, is called the String Pearls Strategy. The String Pearls Strategy is a long-term grand

geostrategy for China to expand the influence of the Indian Ocean region, to eliminate

obstacles both economically and militarily.

In light of China's presence in South Asian geopolitics, the Belt and Road initiative

has affected political tensions in South Asia. Certainly, the BRI is a good project initiation for

economic development in Asia, but the biggest obstacle is confidence in the project. Indian

Security and Foreign Affairs criticized the BRI on the grounds that it enables the projection of

Chinese military power, even though it may be economically beneficial (Freeman, 2018).

There are even suspicions that ports developed and managed by China in Pakistan, Sri Lanka,

Bangladesh and the Maldives, as well as Djibouti, are seen as military stepping stones to

counter India's dominance in the Indian Ocean region (Lu, 2019).

The Pakistan-China partnership is its long-term presence in South Asia. The China-

Pakistan partnership is realized in the China-Pakistan Economic Corridor (CPEC is the BRI

corridor in South Asia), which has implications for China's geostrategic expansion in the

region. This is supported by the assumption that the construction of t h e Port in Gwadar,

Pakistan allows China to monitor sea lines of communication adjacent to the Strait of Hormuz

(Chung, 2018). The Strait of Hormuz is an area that is a Middle Eastern trade route and

military route so that each country has a very large interest in the region. In May 2017,

defense and security talks between the two countries confirmed defense cooperation through

the sale of Chinese submarines, the development of fighter aircraft and patrol boats, and the

establishment of the Pakistan Maritime Security Agency (PMSA) (Freeman, 2018). Thus, the

China-Pakistan Axis aims to strengthen Pakistan's capabilities; and maintain the effectiveness

of threats that can be posed either from the threat of insurgency (internal) or the threat of war

(external). The proximity between China and Pakistan clarifies the long-term external threat in

the Indian Ocean and emphasizes economic and political power in the route. The movement

of India's direction of influence in South Asia is not only caused by the axis China-Pakistan

but also its growing influence with economic cooperation China-Sri Lanka. China's motives

were quite clear to strengthen its ties to Sri Lanka, namely access to oil, ports, and routes to

the Indian Ocean (Sahoo, 2013: 112). After President Rajapaksa's electoral victory in 2005,

China intensified its economic ties with Sri Lanka, following which in 2006-2008 China's

foreign aid surpassed that of Japan (Wagner 2016). However, the election of Rajapaksa and

his proximity to China, made India's influence eroded by China's interests. More than 50% of

the funds received by Sri Lanka from abroad for construction and development projects, since

President Mahinda Rajapaksa came to power, have come from China (Raman, 2011). The

erosion of India's influence further strengthened China's position by building two port

development projects namely Colombo Port City Project and Hambantotat Port Project,

within the MSR project. In addition, China invested in coal-fired power plants, developed

special economic zones, and acquired the right to explore for oil in the Gulf of Mannar (Ayres

and Mohan 2009). China's relationship with Sri Lanka is unfavorable to India as it could have

geo-strategic implications in India. According to Shrivastava (Chung, 2018) in the long term

China has plans to use the port as a refueling station and dock for its navy, patrolling the

Indian Ocean to protect China's oil supplies from the Middle East. China's influence is further

strengthened by Rajapaksa's position with China's willingness to supply modern and heavy

weapons and ammunition to the Sri Lankan Armed Forces in an effort to eliminate the

existence of the Liberation Tigers of Tamil Eelam (LTTE) rebels. In addition to the

relationship of infrastructure development and increased economic cooperation, China-Sri

lanka relations during the Rajapaksa government were no different from Pakistan, namely the

elements of partnership were technology and military access important to China's strategic.

Apart from establishing partnerships with Pakistan and Sri Lanka, China's biggest

priority to strengthen its presence in South Asia is to develop Nepal's potential. China

cooperates with Nepal with road and railroad infrastructure connecting Tibet, Nepal, India,

Bangladesh and Myanmmar. Of course, cooperating with Nepal is a very appropriate strategy

for China, because of the dominance of Maoist leadership in Nepal which began during the

Prachanda period and the election of K.P Oli as Prime Minister. This is supported by the

statement of Zheng Xianglin, Chinese Ambassador to Nepal, on August 5, 2008, which stated

'Nepal is situated in a favorable geographical position in South Asia, and is a passage linking

China and South Asia' (Raman, 2011). Raman's (2011) research also showed data that military

cooperation Nepal-China has been built since 1998, when the Nepalese Military sent its

troops to the Chinese Military University, then in 2007 about 21 Nepalese Military Soldiers

and Officers trained in China. This closeness indicates that Nepal is present as an instrument

to strengthen China's existence in South Asia and become a barrier to the interests of Tibetan

rebel groups that have been threatening political stability on the China-Nepal border.

A further priority for China is to establish infrastructure development cooperation with

Bangladesh in the BCIM corridor linking Bangladesh-China-India-Myanmar road and rail

modernization connectivity. China began diplomatic relations with Bangladesh in 1975,

during the Military junta period, and defense cooperation began in 2002 (Wagner 2016). After

military cooperation was established, Chinese companies began to invest in projects including

the construction of the Chittangong Port and the highway project connecting Bangladesh-

Myanmar. In addition, Bangladesh has granted China exploration rights to develop natural gas

in Barakpuria (Chung, 2018). China also guarantees to increase investment and reduce trade

barriers by providing market access for Bangladeshi products to the Chinese market. China

also guarantees to provide assistance to overcome food security issues and state security in

overcoming militancy and terrorism (Raman, 2011).

The development of port infrastructure and land routes in Chitanggong strengthens the

strategic position of market access and strategic military communication for China-Myanmar.

The report indicates that China's presence not only prioritizes economic development but also

brings a military approach in cooperation with Bangladesh. Although the purpose of building

a military base in Chittangong is to fight radical groups and terrorism including protecting

trade routes, the report strengthens the argument that China's presence in South Asia does not

only bring development influence.

Based on the pattern of partnership cooperation and China's diplomatic relations with

countries in South Asia show great motives, not only to gain access to energy but also to

expand political influence. In some of the case studies above, it shows that China developed a

pattern of cooperation by utilizing infrastructure development including BRI, and also

brought security issues together with military assistance and cooperation. On the profit side in

the development of trade facilities through BRI, there is suspicion of aid and investment. On

the one hand, China uses economic power to help build infrastructure projects, while on the

other hand, China establishes military relations with the country in South Asia. Thus, the

'String of Pearls' strategy is interpreted as establishing economic and military security

partnerships. The effort to build maritime infrastructure in the Indian Ocean has a dual

purpose viz: addressing the growing shipping needs and building a port that can become a

naval base (Kostecka, 2011). In particular, the ports of Gwadar in Pakistan, Chitangong in

Bangladesh and Hambantota in Sri Lanka are potential military assets for China (Dixon,

2014).

Leadership in smaller countries in South Asia must choose between the interests of

India and China, which is more favorable for cooperation. In the external sphere based on the

case studies above, it shows that the success of China's foreign policy is to bring the

perception of development as a path to economic progress through the Belt and Road

initiative and the perception of maintaining mutual security through increased military

cooperation. In international politics, cooperation in South Asia has not shown the impact of

interdependence of partner countries on China but the interests brought by China can make

rivalries in South Asia increase. China's regionalism foreign policy in South Asia is more

influenced by the perception of geostrategic competition, thus making economic development

and security as interrelated.

Conclusions

China's rapid growth has resulted in several initiatives that are driving a major step in China's

transition into the global economy. There is a very clear pattern where the change of

orientation from domestic economic stability to 'go beyond the border' is the main content of

this transition. This model is the most important strategy for China after going through a

period of economic reform This model has contributed greatly to the status of China as a

globalized country. China today in the international system. Some of the most obvious

evidence is the development of a major initiative towards inter-continental development

projects, the BRI (Belt and Road Initiatives). BRI demonstrates China's efforts to promote its

international standing towards an active role in the international economy, and as a result, a

new economic model could better fulfill China's position in the international system.

Economic expansion to the outside world is the most important agenda for China to

develop a network of connectivity so that the economic environment can be maintained.

Although in some policy cases, China can demonstrate its potential for future economic

leadership. Initiative development is the main instrument in shaping China's character in the

international development system and is a challenge of progress for the international

environment.