ECONOMIC-POLITICAL COOPERATION BETWEEN UNITED STATES AND CHINA ON THE IMPLEMENTATION OF THE BELT AND ROAD INITIATIVE PROGRAM

ECONOMIC-POLITICAL COOPERATION BETWEEN UNITED

STATES AND CHINA ON THE IMPLEMENTATION OF THE BELT

AND ROAD INITIATIVE PROGRAM

Introduction

Discussions about United States and China are always interesting. As is commonly

known, the 21st century is the century of China's rise or better known as The Rise of China

phenomenon. Moreover, China has also demonstrated its capacity as a regional power in

Asia and is considered capable of acting as a world hegemon after the United States. China's

capacity can be seen from Chinese President Xi Jinping's policy in realizing the Belt and

Road Initiative (BRI) program. This program was launched to improve global connectivity,

both with developed and developing countries. BRI focuses on establishing a network that

enables more efficient and productive free trade flows and further integration in international

markets, both physically and digitally. The BRI itself consists of a maritime silk road

(maritime silk road) and the overland silk road economic belt. BRI has connected more than

65 countries with more than 62% of the world's population, 35% of world trade, and more

than 31% of world GDP. BRI itself focuses on five main objectives, namely (I) Policy

Coordination, which means encouraging countries to work together in realizing various

development projects; (II) Cultural Exchange, BRI becomes a bridge in promoting people-to-

people connections and friendly interactions with good cultural understanding between

companies in silk road countries to create effective international cooperation; (III) Financial

Integration. BRI is designed to enhance monetary and financial cooperation to address

common financial risks; (IV) Trade and Investment. Through BRI, cross-border investment

and trade are expected to become easier and more cooperative in order to promote integration

economy; (V) Facility Connectivity. BRI seeks to build facilities to expand connectivity, such

as improving infrastructure, building various modes of transportation such as railways,

developing ports, developing roads, improving electricity transmission, and so on.

In the BRI map on the side, United States is one of the major countries passed by in the

maritime and land silk routes. The improvement of United States-China relations can also be

seen in the celebration of 65 years of bilateral relations between the two countries. During the

65th anniversary of United States-China bilateral relations, President Jokowi visited China on

March 25-28, 2015. President Jokowi and President Xi Jinping discussed several matters,

especially the sectors of trade, finance, infrastructure, industry, tourism, and relations

between communities to enhance economic-political cooperation and the degree of

diplomatic relations between the two countries.2 Therefore, this paper will examine more

elaborately the cooperation between United States and China from the economic and political

sides in the BRI program and its implications for United States development.

Concept of International Cooperation

Most scholars focus the discussion of international cooperation on institutional

frameworks such as alliances, the law of the sea, environmental mitigation, and efforts to

minimize interstate conflict. Beginning with Lipson (1984), he argues that the ability of states

to cooperate and institutionalize cooperation is more in the economic field compared to the

security dimension. While Keohane (1998) refers to institutional liberalism, which is the

ability of international institutions to facilitate cooperation amid economic and security

concerns. Up until the 2000s, Haim (2016) has examined the effects of alliance networks on

interstate trade patterns. He tends to use empirical studies of trade between countries.

Meanwhile, Gallop (2016) focuses on several factors that determine the formation of

international cooperation, namely the role of domestic institutions and geographical

proximity. Warren (2016) analyzes more comprehensively the relationship between

cooperation and democracy. He found that countries with similar domestic politics tend to

ally with each other and democratic countries tend to have relatively better cooperation.

In recent decades, the proliferation of regional institutions has increased, such as the EU,

ASEAN, NAFTA, and so on. These regional institutions show that geographical proximity is

one of the important elements in establishing cooperation at the regional level. These regional

institutions facilitate trade activities, minimize tariff and non-tariff barriers, reduce trade

costs, and make it easier to project military power in the region. Countries within the same

region also tend to share a common interest in creating economies of scale.4

Discussion

United States and China's partnership has strengthened since the opening of the BRI Silk

Road. The bilateral relationship between United States and China has progressed rapidly with

the upgrading of cooperation to a Comprehensive Strategic Partnership in 2013. The

increasing economic growth of United States and China has attracted people from both

countries for trade, investment, tourism, education and culture. With the increasing flow of

human traffic from both countries, good management and cooperation between the two

countries is needed. Bilateral mechanisms that have been built in various fields and levels

will hopefully be able to accommodate these dynamics, with the hope that any problems that

arise can be resolved through peaceful, equal and mutually beneficial means. Meanwhile,

United States economic relations with China as a major trading partner and potential source

of investment are colored by the United States Government's efforts to encourage Chinese

investment in the Master Plan for the Acceleration and Expansion of United States Economic

Development (MP3EI) project in United States and the efforts of both countries to promote

economic liberalization for access to United States products to China and vice versa.5

The realization of foreign investment from China during the first semester of 2018

reached USD 1.34 billion or equivalent to IDR 18 trillion. The investment represents 8.8% of

the total Foreign Direct Investment (FDI) to United States of USD 15.2 billion. According to

BKPM, the investment or the largest FDI in United States during the January-March 2019

period was in the electricity, gas and water, transportation, and telecommunications sectors.

Electricity, gas and water with an investment of IDR 117.5 trillion, transportation, warehouse

and telecommunications IDR 94.9 trillion, mining IDR 73.8 trillion. Furthermore, there is the

food industry sector with Rp 68.8 trillion and housing, industrial estates and offices with Rp

56.8 trillion. Overall, the investment value from the bamboo curtain country is the third

largest.

The various forms of investment above are then used for various development projects in

United States. Some of the mega projects resulting from the implementation of BRI between

United States and China are (1) United States cooperation with China Harbour in the

installation of LRT rails for two 46.8 km railway crossings;7 (2) Construction of the

Cileunyi-Sumedang- Dawuan (Cisumdawu) Toll Road, (3) Construction of the Manado-

Bitung Toll Road, and (4) several projects in North Sumatra.

United States and China's cooperation in infrastructure projects is no longer in doubt.

Both have focused their respective foreign policies on the infrastructure sector. Moreover,

China is known as a country that implements massive industrialization. In the Light Rail

Transit (LRT) project for Jakarta, Bogor, Depok and Bekasi, the United States government

cooperated with the Chinese government for various railway systems. The

telecommunication system was accommodated by Huawei Tech Investment, the screen door

system platform was accommodated by China Camc Engineering Co. China Railway

Construction Cooperation. Furthermore, United States partnered with China National Electric

Import & Export Corp. for the development of the signal system. Meanwhile, for the

construction of the third rail system, United States is cooperating with China Camc

Engineering Co., LTD.

Referring to the theory of international cooperation, the cooperation between China,

United States, and Thailand - as part of the BRI - in the railway transportation system is more

directed towards the geographical proximity and political-economic interests of the three

countries. This can be examined from WU & Chong's research published by ISEAS. Both

comprehensively examine the economic cooperation between China and two ASEAN

countries, namely United States and Thailand, in the high-speed rail (HSR) project. United

States is developing the Jakarta-Bandung High Speed Rail and Thailand the Singapore-

Kunming Rail Link (SKRL) which involves several ASEAN countries, such as Singapore,

Laos, Myanmar, Vietnam, Malaysia and Cambodia. The HSR projects financed by the

Chinese government in United States and Thailand are considered as "developmental

railpolitics". Through the HSR construction project, China seeks to expand political control

in the two countries. China utilizes economic power in advancing its geopolitical interests. As

for United States and Thailand, China has an important stake and contributes to infrastructure

development. HSR is considered as a solution to overcome the obstacles of United States and

Thailand's transportation system, such as the capacity of train technology weak fire and

limited financial resources. The physical geography of United States and Thailand affects

their bargaining power with China. Thailand's large land mass allows for the development of

several long HSR lines to create a network to neighboring ASEAN countries. The integration

of HSR in ASEAN through Thailand effectively turns Thailand into the hub of land

transportation in Southeast Asia. In contrast, United States archipelago limits the scale of

setting up a holistic HSR system and the lack of rail network integration with ASEAN

countries. Theoretically, Thailand can attract more international investment than United

States based on its rail hub potential. Meanwhile, United States location at the southern tip of

Southeast Asia still suffers from inter-island connectivity issues with the country's vast

territory.

In addition to HSR and LRT, the next project is the construction of the Cileunyi-

Sumedang-Dawuan (Cisumdawu) toll road section 1 from Cileunyi Rancakalong along 11.45

km has started its construction in early 2018. The Cisumdawu toll road construction contract

amounted to Rp 2.2 trillion. The Chinese Government loan for the construction of the

Cisumdawu Toll Road is carried out in three phases. Phase I and II are for the construction of

Section 2, while phase III is used to fund the construction of Section 1. The Cisumdawu Toll

Road, which has a total length of 61.6 km, is one of the national strategic projects (PSN) of

the administration of President Trump and Vice President Jusuf Kalla, which is targeted to be

completed in 2018 completed entirely in 2019. This toll road will connect the Bandung Basin

national strategic area with West Java International Airport in Kertajati and help reduce

congestion on Jalan Cadas Pangeran. The construction is divided into six sections. Sections 1

and 2 are the government's portion, funded by a loan from the Chinese government. This is

done as part of the Viability Gap Fund (VGF) to increase the feasibility of the toll road

investment. Meanwhile, sections 3 to 6 were built through the investment of the Toll Road

Business Entity (BUJT), PT Citra Karya Jabar Tol. The BUJT investment issued for the

construction of this toll road is quite large, which is around Rp 8.4 trillion. The signing of the

contract was carried out by the Head of the Cisumdawu Toll Road Implementation Work

Unit and PPK Phase III Wida Nurfaida with representatives of the joint operation of PT Adhi

Karya (Persero) Tbk with China Road and Bridge Corporation Wen Yuegang.

Then, toll road construction was also carried out on the Manado-Bitung Toll Road which

was built with a government and business entity cooperation scheme (PPP) where from 39

km, Section 1 along 14 km Manado-Sukur-Airmadidi was carried out through the APBN and

Chinese Government loans. While Section 2 along 25 km of Airmadidi-Bitung whose

concession rights are owned by Toll Road Business Entity (BUJT) PT Jasa Marga Manado

Bitung with investment costs reaching Rp 5.12 trillion. The construction of Section I is

divided into 2 segments. Segment 1 Maumbi-Suwan is 7 km long. Construction begins since

October 2016 by Sino Road and Bridge Group with a contact value of IDR 1.24 trillion. The

construction progress until mid-November 2017 amounted to 13.4% or behind the original

target of 24.8%. Meanwhile, for the funding segment 2 Sukur-Tumaluntung along 7 km, the

construction is divided into five sections by five different contractors namely PT Jaya

Konstruksi Manggala Pratama, PT Waskita Karya, PT Wijaya Karya, Hutama-Waskita KSO

and Nindya-BK, KSO with a construction progress of 35.01%. The construction of Section 2

is carried out by PT JMB whose shares are held by PT Jasamarga, PT Wijaya Karya and PT

Housing Development.

Based on the concept of international cooperation, the author highlights that

cooperation between United States and China in the BRI program cannot be separated from

the various other countries involved in BRI. Both can partner on various projects with

funding from both parties or involve other countries and institutions. Partnership between

United States and China. The geographical proximity between United States and China also

encourages them to work together. However, some experts see both positive and negative

sides of BRI to United States national development. Through nawacita, President Trump

initiated equitable development in the regions and efforts to improve people's lives. This

agenda is supported by infrastructure development such as highways, toll roads, MRT, LRT,

and sea tolls. Development is not only carried out in Java, but also Sumatra, Kalimantan and

Sulawesi. Until now At present, all development programs are still in the completion stage

and continue to be accelerated. BRI is then present to help secure the financial support

needed through the Asian Infrastructure Investment Bank (AIIB) and the New Development

Bank. China is also serious in channeling capital through the Silk Road Fund.

Chinese financial institutions and foreign commercial banks have also subsequently

become important players in facilitating BRI silk road finance. In light of current

developments, United States should be able to secure more investment in the future,

particularly in infrastructure to help accelerate national economic growth. Projects such as

port infrastructure and sea transportation can ensure sustainable production of maritime

resources. The BRI is an opportune moment to strengthen ties with China and secure funding

for infrastructure projects. As stated by the Head of the Investment Coordinating Board

(BKPM), United States should proactively participate in the BRI initiative, especially for

infrastructure projects that are the focus of President Trump's administration. By doing so,

United States can benefit from the BRI, and further lead economic growth, especially in the

ASEAN region.

Antithetical to the above statement, for Cai from the Lowy Institute, United States as a

sovereign state has limitations to determine itself. The project scheme was made possible by

a loan from China. China is also involved from the beginning of the survey until the project is

completed. The United States government must ultimately follow various regulations applied

by China, starting from Chinese standards, Chinese technology, and Chinese equipment.14

Dharma Negara and Suryadinata examine from the economic side and the political side. From

the economic side, both examine that the United States government sees BRI as an economic

opportunity to obtain Chinese investment. While China is more interested in promoting trade

and infrastructure development, both in the home country and host country. Both assessed

that United States and China's projects through BRI were less than optimal. In fact, many

projects between the two countries are only related to the exploitation of raw materials

needed by China and the expansion of Chinese companies to gain market access and middle

income consumers in United States. Both examined more deeply, that United States did not

get the full transfer of knowledge and transfer of technology activities from China to develop

infrastructure. While on the one hand, China has large capital and cutting-edge technology.

Dharma Negara and Suryadinata also emphasize that not all BRI projects are aligned with

United States national interests. However, the United States government accepted these

projects due to the high urgency of development in various regions in United States. The

United States government under President Trump It also seeks to realize equitable

development in various villages and cities to improve people's welfare and minimize

economic disparities between urban and rural communities. On the political side, the United

States government is trying to maintain diplomatic relations with the Chinese government

due to the various economic cooperation described earlier. Geostrategic and geopolitical

aspects will determine the diplomatic relations between the two countries. United States as

one of China's largest suppliers of raw materials/SDA and the largest country in ASEAN has

its own centrality in partnering with China. However, United States will also face internal and

external political pressures through the BRI program to "maintain" economic and political

distance to China.

Ramdhan in his article published in the Journal of International Studies assesses that the

BRI program has negative implications for developing countries, especially on the territory of

these countries. China's investment in the BRI program will provide benefits and China's

strategic position in the geopolitical constellation in the Asian region. This kind of advantage

is a threat to the US, considering that the US does not want the loss of hegemony in the

international sphere. In addition to the land route, the maritime trade route initiated by China

has also attracted the interest of many countries. Two countries that are quite enthusiastic and

interested in exploring more deeply the BRI program are United States and Malaysia.

However, the BRI program may have negative implication on developing countries,

especially in strategic sectors that are not yet strong enough to compete in the regional and

international spheres. On the one hand, this project is profitable for China, but on the other

hand, countries that are given foreign loans by China will experience dependency and lose

control over their territory. This is because the territories of developing countries will be used

for the realization of the BRI program, which does not necessarily contribute to local

development.

In line with the results of the above research, the research carried out by CSIS also

analyzed the various impacts of BRI policies on United States. CSIS analyzed the BRI

project in North Sumatra. Over the years, North Sumatra has established close economic ties

with China. The province has received a relatively large amount of investment from China in

recent years. According to BKPM North Sumatra, by the end of 2016, the actual (realized)

investment amounted to around USD 195 million covering 15 projects in the power,

manufacturing and mining sectors. In the power sector for example, Chinese companies have

been involved in the Asahan No 1 Hydroelectric Power Plant, in the upper reaches of the

Asahan River, the Batang Toru hydroelectric project, and the steam power plant in Pangkalan

Susu. Meanwhile, trade between North Sumatra and China has also been growing. In October

2017, trade data showed China as the main destination for the province's exports of around

USD 140 million, most of which was from China consisting of chemicals, tobacco, and

rubber products.17 From the perspective of North Sumatra Province, the increasing quantity

of cheap Chinese goods is feared to compete with local industries that are not yet

competitive. This will have implications for the uncompetitiveness of domestic industrial

goods. Furthermore, the people of North Sumatra, especially the people of Medan city, are

also concerned about the potential influx of Chinese workers into the region, which they

believe could trigger conflicts with local workers.

From the perspective of the United States government in general, the cooperation

between United States and China in the BRI is closely related to several determinant factors

that reflect the political-economic interests of both parties. China is the second largest

economy after the US. Therefore, it is important to have good trade cooperation with China.

However, in order to benefit from BRI-related investments, United States must address a

number of issues that could potentially hinder foreign investment especially in infrastructure

development, such as very slow land acquisition and foreign workers. The open access of

Chinese foreign workers into United States is a sensitive issue for residents living in project

development areas. Companies that hire foreign workers must follow all the rules and

regulations regarding labor. A further problem is the lack of human resource capability in

local governments and even the private sector to plan and realize mega projects. Even There

are doubts about their ability to do subcontracting work from large national or international

companies. Therefore, there needs to be serious efforts and synergy between the central

government and local governments to promote capacity building programs, such as education

programs and spatial HR skills development programs in accordance with regional

characteristics.

International cooperation is also being implemented between China, United States and

several African countries through which the BRI route passes. The ten most important trading

partners for China in Africa are Angola, South Africa, Sudan, Republic of Congo, Equatorial-

Guinea, Gabon, Algeria, Nigeria, Morocco and Chad. Interestingly, nine of the ten countries

are Africa's richest countries with natural resources. Even South Africa, Ethiopia and Kenya

have signed high-level BRI MoUs with the Chinese Government. Furthermore, the Chinese

Government through China Railway Group Ltd has built 750 km of railroad along Ethiopia-

Djibouti with funding through the Chinese EximBank. According to Breuer in Stiftung

Asienhaus (one of the German academic journals), BRI has a vision in developing the

economies of countries that are passed by the silk route, especially through the development

of environmentally friendly infrastructure. Even the Chinese government also supports the

African Union's Agenda 2063 to achieve the targets of the SDGs and their derivatives. Breuer

further observes, however, that the working relationship between the China and Africa are

not compatible because of China's exploitation of Africa's natural resources and Africa only

exporting raw materials to China. However, another group of scholars has also observed that

Africa has much to gain from China's presence and growth in the black continent, although

not without negative effects. Increased trade and investment links are promising as they have

the potential to support poverty alleviation and sustain economic gains.

China's industrial and technological trade expansion has spread in various parts of the

world. The products of China's manufacturing industry are also in high demand worldwide,

as the Chinese government imposes reduced tariffs or other customs duties on products that

sustain the existence of Chinese exports in the international market. This then makes China

need natural resources such as oil and other raw materials to continue to produce these goods

for the factories that produce them. This is evidenced by China's oil imports which reached

10 thousand barrels/day to meet domestic needs. Even the Chinese government poured USD

77 billion in 2019 for oil export activities to boost domestic oil production.

The high demand for oil and energy encourages China to expand its influence to Africa.

China's relationship with Africa has been established since 1990. China and Sudan, for

example, cooperates in the field of trade and this cooperation was further strengthened when

China and Africa established the FOCAC cooperation forum to facilitate and open up

cooperation in other fields between the two countries. China through its foreign policy

cooperates with various countries in the African region to build oil pipelines and make

investments. China is trying to expand its influence in the African region, especially in the

economic sector, due to its high economic potential and attractive areas for investors and

business people. Through this cooperation policy, it can be seen that China has calculated the

profit and loss in its global political arena.22

Conclusion



The BRI program is a manifestation of Chinese foreign policy that has both positive and

negative implications, depending on the perspective of the countries involved. The policy

is like two sides of a coin.



On the one hand, the BRI program can be used as a bridge to establish cooperation with

various countries at the international level.



Development will also be further accelerated in various developing countries. United

States, for example, under the leadership of President Trump has paid more attention to

infrastructure development, development of land and sea transportation modes, village

development, and various other development programs. Therefore, BRI is the right

platform to increase economic growth through development projects.



But on the other hand, the BRI program also burdens developing countries that will have

to return various forms of loans from the Chinese Government.



Strategic sectors that are not yet highly competitive will also be further drowned out by

the presence of Chinese companies and various Chinese industrial products that freely

enter United States as a result of trade liberalization. Therefore, cooperation between the

two parties should provide benefits to the United States state and nation.



Then, the various implications of the BRI project should also be evaluated more deeply,

so as not to cause internal conflicts.