WINNING WITHOUT WARRING?: THE GEOSTRATEGIC IMPLICATIONS OF CHINA'S FOREIGN DIRECT INVESTMENTS ON SOUTHEAST ASIA AND SOUTH CHINA SEA SOVEREIGNTY DISPUTES

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Date
2021-10-15
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Johns Hopkins University
Abstract
Convention holds that China’s deepening investments and growing trade imbalances in Southeast Asian countries has increased regional economic dependency on China. Less clear is whether increased Chinese investments have softened Southeast Asia’s positions toward China in general, and specifically, on South China Sea (SCS) sovereignty disputes. Through qualitative and quantitative analysis of China's Belt Road Initiative (BRI) and Outward Foreign Direct Investment (OFDI), this thesis examines whether a correlation exists between China’s investments in key Southeast Asia states and achieving a favorable, China-advantaged position on both. China’s investments in Southeast Asia have transformed from securing energy and mineral resources prior to the Global Financial Crisis (GFC), to focused infrastructure investments post-GFC. This shift is emblematic of China’s imperative to export industrial overcapacity and to leverage vast foreign currency reserves to satiate structural economic inefficiencies. This manifested in quantum BRI and OFDI expenditures to the region - and in mutual, economic dependencies between China and the Association of Southeast Asian Nations (ASEAN). However, these investments have not been uniformly embraced across states, nor across domestic political power lines; pitting central government zeal for politico-economic rent seeking against provincial and local power brokers who are crowded out of the inclusive economic benefits of private sector participation, labor, and revenue generation. This dichotomy cross-cuts the notion that China’s flood of regional investments yields preferential advantage with recipient states and mollifies SCS sovereignty disputes. In fact, the reverse is true. China’s unilateral action on bilateral SCS issues further emboldens sub-national political opposition who view national-level, elite leaders’ embrace of China’s economic incentives as non-equitable and high risk. China’s BRI and OFDI serve only as a veneer to the underlying complexity that juxtaposes regional states’ economic development and national security as they relate bilaterally to China. China’s SCS assertiveness is countervailing its economic carrots - and steeling regional states against firmly bandwagoning to China’s orbit.
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BRI, OFDI
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