Idealists might not like it, but geopolitics and money go hand in hand. China is using largesse to extend its global footprint. Under President Donald Trump, the United States seem less inclined to have boots on the ground in faraway places and more inclined to shape events through the threat of sanctions or withdrawal of financial support.
Beijing is dangling carrots while Washington prefers a stick approach. But even as the two apply diametrically opposite strategies, the use of money, rather than the deployment of military assets, lies at the heart of both nations’ foreign policy objectives.
China has been
persuading countries with formal diplomatic relations with Taiwan to switch recognition to Beijing instead. The prospect of trade opportunities in the vast Chinese market, along with China’s capacity and willingness to provide very generous aid and investment packages, are persuasive tools.
Only last month, the Solomon Islands
switched diplomatic recognition to Beijing. Economic considerations were
key to the Pacific nation’s decision. “Establishing diplomatic ties with PRC [People’s Republic of China] can assist the country [to] achieve some of its development aspirations,” Solomon Islands Prime Minister Manasseh Sogavare said last Sunday. “The cost of doing business with China, who is our single major trading partner, will become cheaper and more efficient.”
“Additionally, [the] Solomon Islands will greatly benefit from the Belt and Road Initiative”, which will provide infrastructure development that will “spur our economic development both in the urban centres and in the rural areas”, Sogavare added.
Indeed, the foundation of China’s
Belt and Road Initiative is that member countries gain economically from Chinese investment while Beijing, broadly speaking, favours projects that complement its geostrategic objectives and support its economic expansion.
It has been suggested that China’s generous provision of loans to other nations could result in those countries, which subsequently find they
cannot meet the agreed repayment schedule, falling more under Beijing’s political influence. But if the number of countries taking part is anything to go by, it is a risk many are prepared to take.
At the same time, the Trump administration’s “America first” agenda arguably lends itself to a more non-interventionist military approach, but that does not mean Washington is pursuing
isolationism. Instead, Trump favours
financial sanctions as a policy tool.
In response to the Solomon Islands exercising its sovereign right to switch diplomatic recognition to Beijing from Taipei, US Vice-President Mike Pence
cancelled a meeting with Sogavare and a question mark hangs over the level of future US monetary assistance for the Pacific nation.
More generally, the Trump administration has shown itself ready to impose financial sanctions in pursuit of foreign policy ends. That is arguably something of a departure for Washington, which in recent decades has not been averse to deploying US military assets when such a course of action was perceived as being aligned with US interests.
“Speak softly and carry a big stick.” That was US president Theodore Roosevelt’s foreign policy mantra at the start of the 20th century. In contrast, Trump
tweets loudly and wields a big financial stick in pursuing his policy aims.
The Trump administration has reimposed sanctions on
Cuba, and substantively tightened sanctions on
Iran and
Venezuela. Those are nations which have had difficult relationships with Washington for a long time – but even US allies can incur Trump’s ire.
Turkey is a case in point. Although it is a US ally, and hosts US forces at the Incirlik airbase, Ankara’s recent military incursion against Kurdish militias elicited an unequivocal response from Trump.
“If Turkey does anything that I, in my great and unmatched wisdom, consider to be off limits, I will totally destroy and obliterate the Economy of Turkey,” Trump
tweeted on October 7.
It remains to be seen whether Beijing’s policy of financial largesse or Washington’s willingness to apply financial sanctions will prove the more effective strategy. Either way, it is all about money. It usually is.
Neal Kimberley is a commentator on macroeconomics and financial markets
