China’s Economic Diplomacy | China-ASEAN

By Hao Nan

As charted by the recently concluded Central Economic Work Conference, the Chinese government has a mandate to overcome structural difficulties embedded in the current critical phase of the country’s economic transformation. Though the word “stability” was designated as the end goal for next year’s economic work, promoting further opening-up and reform along with various ongoing economic programs across the country has also been stressed.

In this context, the United Nations’ International Trade Centre discovered that the trade potential of South and Southeast Asia could make up for China’s lost trade volume with the U.S. The ASEAN region has become a crucial player in China’s pursuit of economic stability. Consequently, the time-honored and successful platform of the China-ASEAN Expo is gaining attention, and China’s mutually beneficial economic diplomacy towards ASEAN is inspiring further economic engagement between economies.

China’s Economic Diplomacy

China’s four decades of reform and opening-up has brought rapid economic development. Its average annual GDP growth rate exceeding 9 percent from 1979 to 2018 was far beyond the world average of 2.9 percent over the same period as the country became the second largest economy accounting for 16 percent of world’s total economic output in 2018, a dramatic surge from 1.8 percent in 1978. On average, China contributed 18 percent of global economic growth. Such economic accomplishments were mainly driven by increasing foreign trade from China and foreign investment in China. By 2018, trade value reached US$4.6 trillion, 223 times the value in 1978, making China the world’s largest trader. From 1978 to 2018, foreign trade to China accumulated to US$2.03 trillion, solidifying China’s status of world’s most attractive investment destination. China was also able to accumulate the world’s largest foreign exchange reserve and maintain its preeminence for 13 years.

Alongside China’s economic rise has come ever-more active diplomacy mainly mandated to serve China’s economic development. As the central government champions various grand initiatives such as the Belt and Road Initiative (BRI), Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB), sub-state governments, mostly at the provincial level, have also been fiercely competing for favorable policies from the central government and economic engagement opportunities with foreign entities. Consolidating commercial expositions, political meetings, sub-state diplomacy and people-to-people activities into a single event with specific geographic scope, organizing expos has become a trend across China. Key events include the China-ASEAN Expo hosted by Guangxi, China-South Asia Expo hosted by Yunnan, China-Russia Expo hosted by Heilongjiang and China- Mongolia Expo hosted by Inner Mongolia.

Among its peers, the China-ASEAN Expo remains the most time-honored and successful after its 16th edition in 2019. The ASEAN focus is also compatible with China’s reiterative proclamations on various occasions that ASEAN remains the first priority of China’s diplomacy. Such prioritization can be seen in China’s long-standing foreign policy principle that big powers are key, the periphery the priority, developing countries the foundation and multilateral platforms the stage. ASEAN can be characterized as both periphery and a region of developing countries.

Expo Boom

China’s expo boom has been sweeping across almost every provincial jurisdiction in the country with increasing frequency and quantity. For a long time before the reform and opening-up, the China Import and Export Fair (Canton Fair) launched in 1957 and based in Guangzhou, Guangdong Province, served as the only export product showcase window for the whole country, aiming to break through the economic blockade caused by the Korean War and facilitate trade with business communities in Hong Kong, Macao and Southeast Asian countries. In the 1980s, the Canton Fair’s monopoly was broken by a series of expos mostly featuring industry focus and a rotating basis. Government-launched, foreign region-scoped and multifunctional large expos emerged only after 2000, highlighted by the establishment of a permanent annual national-level expo, the China-ASEAN Expo (CAEXPO). Such new practice was soon replicated by other provinces, leading to a boom across the country.

International public opinion tends to interpret China’s spread-out expo boom as driven by political aspirations rather than economic calculations because the above-listed national level expos are all tied to a specific geographic scope, hosted by a specific Chinese jurisdiction, addressed by a member of central leadership and ornamented with high-profile diplomatic slogans. The identified geographic scopes also align with China’s long-standing foreign policy principle of big powers as key, the periphery the priority, developing countries the foundation and multilateral platforms the stage because the targeted countries and regions are mostly neighboring countries and developing regions.

However, regardless of any non-economic functions added to these expos, the underlying economic nature remains their very cores. One obvious feature is that most expo-host provinces are situated along land border areas perceived as forgotten after ocean-facing opening-up brought dazzling prosperity to the coastal area. This trend is represented by northwestern and northeastern hosts like Ningxia, Heilongjiang and Jilin. Jilin’s China-Northeast Asia Expo (CNEAE) presents a prime example because its launch of the ASEAN+3 Summit in 2005 was clearly intended to serve China’s 2004 national plan to revitalize the old northeastern industrial base. By acquiring favourable policies and certain autonomy through international expos, local governments can explore new growth points and stimulate their economies.

Case Study: CAEXPO

The CAEXPO and its twin event the China-ASEAN Business and Investment Summit (CABIS) hosted by Nanning, capital of Guangxi Zhuang Autonomous Region, have been running for 16 consecutive years since its inception in 2004 following China’s initiative at the 7th ASEAN-China Summit in 2003 to foster relations and cooperation between China and ASEAN which was well-received by all ASEAN member states. The CAEXPO is now co-organized by China’s Ministry of Commerce (MOFCOM), China Council for the Promotion of International Trade (CCPIT), Guangxi and Nanning governments, and ASEAN countries’ relevant government agencies and business associations. At the very beginning, the two neighboring regions of Yunnan and Guangxi vied for the profitable status as the gateway to Southeast Asia. Both border Southeast Asia and possess distinctive advantages to serve the role. Ultimately, Guangxi stood out while Yunnan was rewarded by the permanent designation as window to South Asia.

ASEAN has remained a priority for China’s foreign policy and diplomacy. Initially given a mandate of trade and investment promotion and cooperation, the CAEXPO was soon expanded by the Guangxi government with encouragement from the central government to become a comprehensive platform for China-ASEAN relations and cooperation. Various new events and programs with diplomatic connotations were added to support national and local policies and initiatives such as free trade zones, justice forums, ecological and environmental forums, art festivals, think tank forums, education forums, police cooperation, technology transfer and innovation cooperation. Every year, apart from commercial delegations the Expo is also attended by high-level official delegations from each ASEAN country normally led by national-level leaders, and a vice premier from China. Naturally, bilateral and multilateral diplomatic engagement is also included. CAEXPO has become a typical example of a Chinese one-stop expo offering a commodity fair, investment consultation, political meetings, diplomatic engagement and cultural activities.

Regardless of how much additive is brought to the CAEXPO, the economic motivation, rationale and impact are still the most obvious reasons the expo has thrived and maintained momentum. Since its inception, the CAEXPO has witnessed steady increase in all indices, as shown in Table 2, ranging from ASEAN booths and display area to numbers of participating enterprises and individuals. Most importantly, trade and investment relations with ASEAN have enormously reshaped the economic landscape of Guangxi. With a yearly increase in both transaction value and contracted value at every year’s expo as shown in Figure 1, Guangxi saw its trade value with ASEAN and its trade dependency on ASEAN continuously surge from US$100.11 million and 23.3 percent in 2004 to US$1988.6 million and 49 percent, almost 20 times growth. Such trade and investment has also facilitated a series of other projects in Guangxi including the “Two Countries, Twin Parks,” Guangxi Beibu Gulf Economic Belt and the Free Trade Area alongside obvious improvements in connectivity of infrastructure across Guangxi.

As China further promotes its maturing practice of economic diplomacy represented by Expo Diplomacy, an opportunity window has been further widened for regional economies to board the bullet train of China’s economy. Inspired by successes of Guangxi’s relations and cooperation with ASEAN countries, expo-enabled international cooperation in trade, investment and other areas is providing good reference for other expos to replicate. The trend has the potential to inject strong impetus into China’s slowing economy as well as regional economies impacted by uncertainties and risks brought by the unstable international trade regime.

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