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China has power, ambition and wealth but no strategy says new study

China does not have a coherent global strategy to match its growth, concludes a new report from the London School of Economics and Political Science.

It finds that China’s foreign economic policies are confused or even contradictory because they are driven by domestic politics and priorities rather than by any grand strategic plan.

This means that China may not be in full control of its overseas investments and resources, while muddled attempts to increase its regional power may be making America stronger.

ChinaReportCover_WEBThe report – China’s Geoeconomic Strategy – is published today by LSE IDEAS, the centre for international affairs, diplomacy and strategy. It draws together insight from eight China experts – who include academics, journalists and policy analysts.

While China’s military might is expanding, writes author and journalist Jonathan Fenby, its policy towards its neighbours has been confused. Sabre-rattling over control of the South China Sea has only alarmed neighbours such as Vietnam and the Philippines and led them to seeker closer alliances elsewhere.

China knows, says Fenby, that: “the US will remain the principal military power in East Asia and that any serious attempt to challenge it will only drive other countries further into its arms.

“Even in its own backyard Beijing lacks strategic coherence. That may reassure states which would fear a determined, coordinated Chinese approach, but it also opens up the possibility of miscalculations and makes dealing with the PRC more difficult.”

Jie Yu argues that this uncertainty also extends to commerce and overseas investment where the close relationships between the Chinese government and companies (even private companies) can stifle their effectiveness.

She writes “Their close association and somewhat submissive relationship with the Chinese government have impeded their overall business plans.

“Chinese companies are particularly vulnerable – not to mention complacent when they operate abroad. China’s competence in ‘buying up the world’ has been grossly over-estimated by the West.”

This scepticism is echoed by Shaun Breslin in his examination of China’s approach to securing resources. He argues that while the state has a strategy for securing energy, food and mineral supplies, so too do Chinese companies who may prefer to make a profit rather than meet a domestic need.

And as Chinese interests develop overseas to meet its resource needs, this increasingly draws the country into conflicts and disputes (such as those in Sudan, Libya and Iran) which it would prefer to avoid.

The difficulties of imposing central control are also highlighted by Arne Westad, co-director of IDEAS, who writes: "The Chinese government today wants to play a strong regulatory role in the development of the country’s
economy. Because China is a political dictatorship, all institutions, including private companies, pay generous attention to government instructions.But in reality the state’s ability to influence private decision-making is limited, in spite of the repressive means at its disposal."

Elsewhere in the report, Xiaojun Li analyses the country’s trading power. Linda Yueh and Nicola Casarini look at the health of the Chinese economy and the way it has responded to world financial crisis while Guy de Jonquières questions the whole idea of a power shift to China.

While all the authors identify the latest thinking and planning coming from Beijing, they also highlight the flaws in those plans and the obstacles in China’s path.

The report’s editor, Nicholas Kitchen, concludes: “Not only is China not conducting a coherent geoeconomic strategy, it is often not in direct control of the policies it has. Nor is China necessarily that competent in the international economic arena. Significantly, these failings of foreign-economic policies are increasingly producing diplomatic difficulties for China.”

The full report is available here
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29 May 2012

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