China and the Asia-Pacific Economic Cooperation
November 12, 2014
This article has been produced by the efforts of the following members:
Louis-Claude Perrault-Carré – Team Leader examining Chinese Risk
The Asia-Pacific Economic Cooperation (APEC) began in 1989 as an annual meeting of member states as “…the premier forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region.”[i] This cooperation has grown to include 21 member states including most powers with a coast on the Pacific Ocean, representing “…55 percent of world GDP.”[ii]
The 2014 Economic Leaders’ Meeting was held in Beijing, China on November 10-11, 2014.[iii] This meeting resulted in expansion around the proposed Free Trade Area of the Asia-Pacific (FTAAP), which would include all major economies, compared with the American-proposed Trans-Pacific Partnership (TPP), which excludes China.[iv] The TPP would bring the United States and China much closer together, “setting[ing] higher standards for doing business…”[v]
In his opening address to delegates of the conference, President Xi addressed the need for an open environment, deep structural adjustments, better connectivity, and fixing problems caused by regulation on a domestic level, but also looking at the general ‘common market’ of the Asia-Pacific region.[vi] It was made clear that China is much more interested in a regional free trade agreement, along with bettering regional interests and relationships. China’s “New Silk Road Strategy” is much more in-tune with the Chinese government’s interests, as was seen with the $40 billion investment announced by President Xi on November 8, 2014 focusing on infrastructure development.
The TPP would have been a very significant advancement in Sino-American relations, but for various reasons, it failed. The FTAAP is more encompassing, including China and the United States; it is supported by the Chinese government, and seems to be getting underway. This is significant because it may accomplish what the TPP was never able to, which is creating a free trade agreement between China and the United States, among other states. This would greatly influence business, removing tariffs, and potentially standardizing major business practices, reducing corruption, and regulations of the government.
President Xi’s prioritization of the “New Silk Road Strategy” is significant because China’s leadership strongly believes that “…China’s economic development is key to regional prosperity. As he put it: “We are bound to create and fulfill an Asia-Pacific dream for our people.”[vii] In addition, the inception of a new Asian Infrastructure Investment Bank, as well as the aforementioned $40 billion invested into the Silk Road project will link, coordinate, and bring together the regional economies. As described by Wang Liwei, writer for Caixin Online, China’s investment and creation of a new bank brings back memories of a post-World War II Marshall Fund in Europe.[viii] Even if they have denied comparisons, this significant investment by the Chinese government shows the region, and the world, that China wants to grow domestically, regionally, and that “Beijing is boss”.[ix]
The balance of power has shifted to the hands of Beijing, the Asia-Pacific region needs to either get on China’s side, and/or hope the United States provides an adequate counterbalance to the situation. As per Simon Denyer of the Washington Post, perhaps the region needs to be wary of a Chinese regional hegemony.
