James Monroe was the fifth president of the United States. Under his administration what became known as the Monroe Doctrine was first stated in 1823. The doctrine became a long-standing tenet of U.S. foreign policy. It declared that the Western Hemisphere was America’s area of influence. The premise of the Monroe Doctrine was that further efforts by European nations to colonize or interfere in North or South America would be viewed by the United States as acts of aggression, thereby necessitating American intervention. The establishment of the Monroe Doctrine was a defining moment in U.S. foreign policy.
Turning the clock almost 200 years later, China is aggressively implementing its own form of the Monroe Doctrine, not just for countries with which it shares borders, but extending throughout East Asia, South Asia and even into countries bordering the Indian Ocean.
I’ve named this foreign policy the Xi Doctrine, after China’s president Xi Jinping. Xi is using both China’s economic and military tool kit in what he sees as China’s sphere of influence.
After President Obama’s decision to extricate the U.S. from the disastrous wars in Iraq and Afghanistan, in 2010 the Obama administration initiated what it described as a “pivot to Asia.” America’s pivot to Asia was a change in strategy aimed at bolstering the United States’ defense ties with countries throughout the Asia-Pacific region. While many smaller countries in the region were hopeful that it was in fact a pivot by the U.S. to Asia, privately it was viewed by many governments and leaders in the region as political rhetoric, one that would have minimal if no impact in the region. China went further, viewing Obama as a weak president, America as a declining global power, and saw the regional power vacuum as an opportunity to assert China’s influence in the region.
Since the announcement of America’s pivot to Asia, China’s has taken what many in the West and in Asia considered to be aggressive actions in the East China and South China Seas, areas in which Beijing maintains it has long-standing, historical claims of sovereignty. Beijing views its actions as defensive. These actions by China have rattled China’s neighbors, including Japan, the Philippines, Indonesia and Vietnam. As China likely anticipated, there was no meaningful response by the United States, thereby providing Beijing with a green light to continue to assert its role in the region.
Actions by China’s military in the region are only part of the equation. Perhaps more importantly are China’s economic actions in what Beijing sees as its area of influence.
For the first time since the reforms initiated by Deng Xiaoping in 1978, China’s outbound direct investment will exceed the level of foreign investment.
Beijing announced that for the first nine months of this year that China outbound investment totaled $75 billion, an increase of almost 22 percent over the same period in 2013. While not quite ahead of the amount of foreign investment into China, Zhang Xiangchen, the country’s assistant minister of commerce indicated that based on current trends that outbond direct investment would exceed foreign investment by the end of this year.
With $4 billion in government administered foreign exchange reserves coupled with Beijing’s ability to influence foreign investment by both state-owned-enterprises and local private companies and investors, China is mobilizing its economic toolkit. This is being implemented globally, but most importantly in Asia, it’s sphere of influence.
China’s foreign direct investment is attractive not only to the governments of its direct neighbors, but also to country’s throughout the entire Asia-Pacific and Indian Ocean region.
Infrastructure investments, including pipelines, roads, rail lines and free trade zones have been openly welcomed by governments from Mongolia on the Northwest, Kazakhstan on the West, Pakistan, to the south, its neighbor Myanmar, and even the small island nation of Sri Lanka, off the southeast coast of India.
This foreign direct investment is a key aspect of President Xi Jinping’s strategy in implementing Beijing’s “Asia-Pacific Dream.” It provides the economic framework that should boost economic growth and improve infrastructure throughout the region.
With a void of power due a lack of foreign policy by America’s Obama administration, China has to a large extent been successful in convincing leadership of countries in its sphere of influence to forget about the U.S and accept the reality that China is the alpha-power in the region, both economically and militarily. China is now using its economic power as a tool, to what the Xi administration see as a reconfigured Asian order, one centered in Beijing.
China’s economic strategy has been described as being similar to the U.S. Marshall Plan that rebuilt Europe after World War II. Others see it as an effort by China to reinstitute a tributary system through which china dominated East Asia for much of 2000 years.
Neither of these conclusions are incorrect. China has sought to use its influence in the region through both foreign aid and investment as a way to obtain access to Central Asia’s natural resources, with oil at the top of the list.
The Xi Doctrine encompasses China’s “Silk Road Economic Belt,” which includes a transport corridor connecting the Pacific Ocean to the Baltic region, and linking China and East Asia to South Asia. It also includes what Beijing has described as the “21st Century Maritime Silk Road,” which includes Sri Lanka, Kenya and extends to Greece in Europe.
In May of this year Xi was more direct. He touted a new security concept, indicating that “it is for the people of Asia to run the affairs of Asia, solve the problems of Asia, and uphold the security of Asia.” My conclusion is that this statement was the moral justification for the new Xi Doctrine.
What is the implication of the Xi Doctrine for entrepreneurs and business leaders in China, Asia as well as global investors? There is only one conclusion, specifically that this century, which has been called China’s century, will bring tremendous opportunities, and the Xi Doctrine is a confirmation of what the future will bring.
Author: Jeffrey Friedland
Jeffrey Friedland is the author of “All Roads Lead to China: An Investor Road Map to the World’s Fastest Growing Economy,” which is available in print and Kindle editions at Amazon and other booksellers.
Mr. Friedland is the CEO of Friedland Global Capital, a firm that assists companies in emerging and frontier markets in achieving their corporate finance objectives including accessing global equity capital. He is also the chairman and CEO of INTIVA Inc, a life sciences firm that enables investors to participate in the growing worldwide cannabis industry.