Skip to main content

Site navigation

  • University of Technology Sydney home
  • Home

    Home
  • For students

  • For industry

  • Research

Explore

  • Courses
  • Events
  • News
  • Stories
  • People

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt
  • Study at UTS

    • arrow_right_alt Find a course
    • arrow_right_alt Course areas
    • arrow_right_alt Undergraduate students
    • arrow_right_alt Postgraduate students
    • arrow_right_alt Research Masters and PhD
    • arrow_right_alt Online study and short courses
  • Student information

    • arrow_right_alt Current students
    • arrow_right_alt New UTS students
    • arrow_right_alt Graduates (Alumni)
    • arrow_right_alt High school students
    • arrow_right_alt Indigenous students
    • arrow_right_alt International students
  • Admissions

    • arrow_right_alt How to apply
    • arrow_right_alt Entry pathways
    • arrow_right_alt Eligibility
arrow_right_altVisit our hub for students

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt

POPULAR LINKS

  • Apply for a coursearrow_right_alt
  • Current studentsarrow_right_alt
  • Scholarshipsarrow_right_alt
  • Featured industries

    • arrow_right_alt Agriculture and food
    • arrow_right_alt Defence and space
    • arrow_right_alt Energy and transport
    • arrow_right_alt Government and policy
    • arrow_right_alt Health and medical
    • arrow_right_alt Corporate training
  • Explore

    • arrow_right_alt Tech Central
    • arrow_right_alt Case studies
    • arrow_right_alt Research
arrow_right_altVisit our hub for industry

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt

POPULAR LINKS

  • Find a UTS expertarrow_right_alt
  • Partner with usarrow_right_alt
  • Explore

    • arrow_right_alt Explore our research
    • arrow_right_alt Research centres and institutes
    • arrow_right_alt Graduate research
    • arrow_right_alt Research partnerships
arrow_right_altVisit our hub for research

For you

  • Libraryarrow_right_alt
  • Staffarrow_right_alt
  • Alumniarrow_right_alt
  • Current studentsarrow_right_alt

POPULAR LINKS

  • Find a UTS expertarrow_right_alt
  • Research centres and institutesarrow_right_alt
  • University of Technology Sydney home
Explore the University of Technology Sydney
Category Filters:
University of Technology Sydney home University of Technology Sydney home
  1. home
  2. arrow_forward_ios ... Newsroom
  3. arrow_forward_ios ... 2015
  4. arrow_forward_ios 05
  5. arrow_forward_ios China’s new economic diplomacy

China’s new economic diplomacy

26 May 2015

James Laurenceson

 

James Laurenceson, Deputy Director, Australia-China Relations Institute, University of Technology Sydney

Download

This article appeared on University of Nottingham’s China Policy Institute Blog on May 26 2015.

For a long time China’s economic diplomacy wasn’t particularly inspiring or pretty to look at. There were investment forays into some resource-rich countries in Africa and aid packages dished out to small pacific island countries. But there was little to suggest that China was drawing on its rising economic clout to lay any claim to regional or global leadership. Nor was it offering up any grand strategic vision as an alternative to the status quo. 

Perhaps this was deliberate. In the early 1990s, Deng Xiaoping is said to have advocated that China should “Observe carefully; secure our position; cope with affairs calmly; hide our capacity and bide our time; be good at maintaining a low profile; and never claim leadership”. Not any longer. 

It was just 18 months ago in Jakarta that China’s President, Xi Jinping, first publically raised the idea of an Asia Infrastructure Investment Bank (AIIB). By April this year, 56 other countries had signed on to become prospective founding members of the China-sponsored proposal. Notably absent were the US and Japan. But in the fold were numerous security treaty allies of the US, including Australia, New Zealand, the Philippines and the Republic of Korea.  Representatives from all of these countries are now hard at work in Beijing nutting out the details of how the bank will operate. All reports are that it will be up and running by the beginning of next year. 

The AIIB is just a part of the “One belt, One road” agenda that President Xi has been promoting, which would see the economies of the region more closely tied together and China restored to its historical place at the centre. Part of the shift in China’s approach can be explained by internal factors. Many experts take the view that President Xi has emerged as China’s most authoritative leader since Mao Zedong. This has allowed him to move out from behind the shadows of past leaders such as Deng and voice his own ambitions for China and its place in the world. 

There’s also the fact that the case for greater Chinese leadership is no longer based on potential but on reality. Last year the International Monetary Fund (IMF) said that China had become the world’s largest economy in terms of its purchasing power. Even as its growth slows to around 7 percent, it continues to add more US dollars each year than ever because it is now much bigger. In 2013 it overtook Germany as the world’s largest trading nation. 

Jim O’Neill, inventor of the famous BRICs acronym, recently pointed out that if incumbent institutions such as the IMF don’t quickly learn to accommodate a rising China, it won’t be China’s influence that will be diminished. Rather, it will be the relevance of these institutions that recedes. 

But for China to truly become a leader, other countries must be convinced to follow. And it’s here where the true masterstroke of China’s new economic diplomacy resides. For many countries of the region, what China is proposing is more genuinely multilateral, more genuinely win-win, than anything they’ve seen to date. At the APEC Summit in Beijing last November, President Xi said that he no longer just had a “China dream”, an earlier turn of words aimed at a domestic audience, but an “Asia-Pacific dream”. It’s a killer narrative. 

The US and Japan have criticised AIIB for being unilateral, an institution dominated by China. But this is not by China’s design. The AIIB welcomed all comers. The only reason that China continues to loom larger than it would otherwise is because the US and Japan have refused to join. With 57 countries on board that span all levels of development, appearing multilateral is no longer something that the AIIB needs to be worried by. 

The AIIB is also being formed against the backdrop of incumbent institutions that plainly do struggle to be representative. China and India are well aware that they are now the world’s largest and third largest economies. Yet their voting shares at the Asian Development Bank are stuck at around 5.5 percent, less than half that of both the US and Japan. It’s the same story at the World Bank.

Neither would any of the other 56 countries that have joined the AIIB have done so unless they thought it was in their own national interest. That’s where win-win comes into play. For the poorer countries of the region the AIIB offers another desperately needed source of infrastructure finance. The fact that India, the Philippines and Vietnam didn’t hesitate to sign on despite being engaged in a territorial dispute with China shows just how much sugar they see on the table. For higher income countries such as Australia it will provide a boost to exports of natural resources like iron ore, as well as design and engineering services. 

Last year China threw its weight behind reinvigorating the idea of a 21 country Free Trade Area for the Asia Pacific (FTAAP). The FTAAP includes both the US and Japan. But the US and Japan resisted and pushed hard in a different direction: a Trans-Pacific Partnership, a 12 country grouping that doesn’t include China. It’s not hard to see which proposal is the more multilateral.

It’s also not hard to see which offers the greatest scope for win-win. Research published by the EastWest Centre last year put the global income gains from the TPP at less than 12 percent of those that would flow from the FTAAP. Ironically, the results also showed that the US and Japan would themselves do far better out of the FTAAP than the TPP. 

So far the FTAAP proposal hasn’t progressed beyond APEC members agreeing to conduct an initial exploratory study. But it does serve to punctuate China’s new approach to economic diplomacy. And as long as it’s China that is coming up with the multilateral and win-win initiatives, its transition to a regional and global leader could happen far quicker than anyone imagined.


Author

Professor James Laurenceson is Deputy Director of the Australia-China Relations Institute at the University of Technology Sydney. 

Share
Share this on Facebook Share this on Twitter Share this on LinkedIn
Back to Commentary

Acknowledgement of Country

UTS acknowledges the Gadigal People of the Eora Nation and the Boorooberongal People of the Dharug Nation upon whose ancestral lands our campuses now stand. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands. 

University of Technology Sydney

City Campus

15 Broadway, Ultimo, NSW 2007

Get in touch with UTS

Follow us

  • Instagram
  • LinkedIn
  • YouTube
  • Facebook

A member of

  • Australian Technology Network
Use arrow keys to navigate within each column of links. Press Tab to move between columns.

Study

  • Find a course
  • Undergraduate
  • Postgraduate
  • How to apply
  • Scholarships and prizes
  • International students
  • Campus maps
  • Accommodation

Engage

  • Find an expert
  • Industry
  • News
  • Events
  • Experience UTS
  • Research
  • Stories
  • Alumni

About

  • Who we are
  • Faculties
  • Learning and teaching
  • Sustainability
  • Initiatives
  • Equity, diversity and inclusion
  • Campus and locations
  • Awards and rankings
  • UTS governance

Staff and students

  • Current students
  • Help and support
  • Library
  • Policies
  • StaffConnect
  • Working at UTS
  • UTS Handbook
  • Contact us
  • Copyright © 2025
  • ABN: 77 257 686 961
  • CRICOS provider number: 00099F
  • TEQSA provider number: PRV12060
  • TEQSA category: Australian University
  • Privacy
  • Copyright
  • Disclaimer
  • Accessibility