Fear of Chinese Economic Hegemony

In the context of discussing the Trans Pacific Partnership (TPP), and the U.S. role in the Asia-Pacific region, Robert Kagan of Brookings raises the specter of competition with China and says this:

Economically, China would like to turn Asia into a region of Chinese hegemony, where every key trade relationship is with Beijing.

Along the same lines, law professor Noah Feldman says:

China is using its close economic relationship with its neighbors as leverage to build its geopolitical position. Its ultimate goal is to displace the U.S. as the regional hegemon.

I’m puzzled by statements like these.  What do Kagan and Feldman think Chinese economic “hegemony” in Asia would look like?  What exactly do they fear?

I don’t know the answer to what’s going on in their minds, but I have tried to look at what China is actually doing.  One thing it is doing is signing trade agreements with other countries in the region.  So are these trade agreements part of a scheme to dominate its neighbors?  Well, the text of the agreement China signed with Australia was just released, so let’s take a look at some of what it says.  As described by the Australian government, China would liberalize a lot of its trade with Australia, including the following:

  • Health and aged care services: China will permit Australian service suppliers to establish profit-making aged care institutions throughout China, and wholly Australian-owned hospitals in certain provinces. This will greatly expand the Australian private health sector’s offering of medical services through East Asia.

So Australia is touting the agreement as a way to build hospitals in China, and more generally to sell products there. (Australia also notes that 92.9 per cent of China’s imports of resources, energy, and manufactured products from Australia will enter duty free right away, with most remaining tariffs removed within four years.) This makes the whole idea of China’s “economic hegemony” sounds a lot less scary. Rather than setting up a system to compete with the United States, China seems to be participating in the same rules-based, liberalizing trading system that the United States and just about everyone else is in.

I wrote more about this issue in a recent Free Trade Bulletin.

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