Power asymmetry and threat points: negotiating China's infrastructure development in Southeast Asia

ABSTRACT

China's ambitious global infrastructure investment plan, embodied in the Belt and Road Initiative and backed by massive financial resources, is an attempt to secure cooperation from developing countries in Asia and beyond to support its rise as a global power. Such cooperation, however, is not guaranteed. Despite the power asymmetry between China and partner countries, as well as the latter's significant infrastructure investment needs, host countries still need to be convinced of the specific benefits of China's projects, thus creating a bargaining opportunity. Significant room for negotiations emerges due to the domain characteristics of infrastructure development and China's strategic motives and industrial policy needs which often misalign with the host country's development priorities. I construct an analytical framework drawn from bargaining theory to explain when power asymmetry may fail to prevail in China's infrastructure diplomacy, which is illustrated by its high-speed rail negotiations in Southeast Asia. The relative bargaining power of a host country is influenced by its threat points, which interact with the project terms offered by China to produce final bargaining outcomes. This article offers a new perspective on the agency of weaker states in the context of China's rise.

KEYWORDS:

• China's infrastructure diplomacy
• asymmetry
• bargaining
• threat points
• Southeast Asia
• high-speed rail

Acknowledgments

The views expressed in this article do not reflect those of the Korea Institute for International Economic Policy. The author wishes to thank three anonymous reviewers for their extremely helpful suggestions and comments on earlier drafts. The usual caveats apply.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. On the other hand, smaller states can benefit from such a rivalry. For instance, Central Asian states extracted favorable political and economic terms from Russia, the United States and China by exploiting great power competition for influence in the region (Cooley, 2012).

2. Host countries are quite sensitive to project terms. In 2015, the Ghanaian government cancelled half of a $3 billion loan from the China Development Bank (CDB) after the CDB demanded that it increase the contractual loan payments in oil from 13,000 to 15,000 barrels a day (Financial Times, 2016).

3. Vietnam represents a non-negotiation case, where a security issue prevented even the initiation of formal negotiations. China has repeatedly proposed a Kunming–Hanoi high-speed rail line, yet Vietnam has not responded. The project could potentially pose a serious security risk to Vietnam, since the line would be built along China's traditional invasion route into the country, most recently used during the 1979 Sino–Vietnam War. Since China has alternative routes, such as the Kunming–Vientiane railway, its interest in the Kunming–Hanoi project has diminished.

4. Construction has been extremely slow due to delayed issuance of permits and, more importantly, local resistance to land acquisition (Bland, 2016). Indonesia lacks effective conflict resolution institutions for land acquisition, especially over compensation. The CDB withheld the disbursement of loans to the project until May 2017 citing concerns over land procurement (Suzuki, 2017).

5. The passenger train will be able to run at speeds of 160 km/h, while the freight services will run at 120 km/h. This will reduce the travel time from 24 to three hours (Railway-Technology, 2016).

6. AidData http://china.aiddata.org/projects/33726.

Additional information

Notes on contributors

Yoon Ah Oh

Yoon Ah Oh is a Research Fellow at the Korea Institute for International Economic Policy, South Korea. Her research focuses on the political economy issues of developing countries with a special focus on Southeast Asia.