CHINA'S IMPERIAL DESIGN

China's imperial ambitions are characterised by illiberal and expansionist forms of global engagement. China is now an offensive state, as evidenced by its wolf-warrior diplomacy and salami-slicing tactics. It also displays expansionist traits in the South China Sea and Himalayan region, increasingly willing to use force to impede freedom of navigation.  These behaviours indicate its imperial ambitions, which are evident in its policies towards India, Taiwan, and the South China Sea. Moreover, China has used its economic clout to create regional blocs like Cambodia, Laos, Myanmar, and Thailand in order to block a united ASEAN stand against China’s aggressive pursuit of territorial claims in the South China Sea. The same is taking shape in the Himalayas, in the form of the Himalayan Quad.

China’s approach abroad mirrors its domestic principles and experiences, notably its centralized, single-party-led political and economic model. China, as a mercantilist nation, seeks to boost its exports by tapping into foreign markets for its products, offsetting the waning domestic demand and the looming economic crisis within its borders. The article explores how domestic configuration contributes to Chinese imperialism, which manifests in two ways in a globalised world: the weaponisation of interdependence and the erosion of nation-states' sovereignty. It suggests that China's mercantilist imperialism is self-sustaining. The strategic manipulation of domestic political and economic structures has steered China's diplomacy and foreign policy.

China’s Imperial Domestic Design

China’s domestic framework fosters the ascent of merchant capital within an anarchic world order, amidst the geopolitical competition of major powers vying for influence. China represents a unique blend of mercantilism and communism, illustrating how a totalitarian state can collaborate with monopoly capital, akin to the historical imperial powers of Britain and the US. The mercantilist approach advocates for limiting free trade to raw materials and supports the establishment of domestic industries through high tariffs. This narrative suggests a symbiotic relationship between the state and commercial entities, where economics and politics serve to advance each other’s interests. International trade is monopolised to block foreign influence and secure benefits for the nation. Contrary to Marx’s predicted stages of societal development, China has taken a mercantile imperial turn.

Furthermore, China’s state capitalism, which employs mercantilist tactics, emphasises an assertive export strategy led by powerful oligopolies. China has evolved into a notably successful mercantilist state, competing internationally while managing its domestic economic activities through the State-Owned Assets Supervision and Administration Commission (SASAC). This commission functions as a government-operated holding company, directing production towards trade surpluses and international economic expansion. As of 2021, it stands as the world’s largest economic entity. Although there have been attempts to liberalise China’s economy, the domestic markets remain under the tight control of 97 central state-owned enterprises that direct state capital into key economic areas. It may lead to a situation in which efficiency in production and radical political ideas develop in a symmetrical proportion. For example, China, with its huge demographic dividend-led manufacturing production produces production efficiency which led to the commanding bourgeoisie coming out in support of a party-state system of governance. This party state however is suspicious of increasing growth and strength of the alternatives to the status quo. It signals the synthesis of efficient economy and radical polity thus creating a fitting environment for emerging a mercantilist state. 

Moreover, China is classified as an “authoritarian regime” in the Democracy Index. It has a score of 0.88 for civil liberties: there is no free print, broadcast or social media, and no freedom of expression. The absence of democracy has eroded civil liberties and gave birth to ‘One party, one state’ or ‘Party-state’ which knows the truth and is better suited to guide the nation. This, in turn, has caused the emergence of the Platonic state in China where truth is fixed and known with certainty and any change or diversion from it is evil. The emergence of the ‘Party-state’ brand of nationalism derives its inspiration from China’s dream of ‘Great rejuvenation’. The Communist Party’s influence on all walks of life, in China and abroad, is pervasive. For example, under China’s law, all enterprises which have more than seven employees - private or state-owned companies- should establish Communist party cells that report directly to the central committee. Also, by the 2015 national intelligence law, all individuals or institutions are required to cooperate with the country’s agencies on all matters of concern to the party state. This has alerted many countries to the pitfalls of doing business with China.

With the dream of great rejuvenation and shaping the world order with Chinese illiberal characteristics, China has abandoned its ‘peaceful rise’ foreign policy. The constitution of China has been amended to remove the principle of collective leadership and allow a personality cult to lead the party and the state. It permits the President to serve beyond a 10-year term. The first concerted effort by the Communist Party of China (CPC) to shape Chinese nationalism came with the launch of the ‘Patriotic Education Campaign’ in the 1990s. It aims to correct “three belief crises” (sanxin weiji): the crisis of faith in socialism (xinxin weiji), the crisis of belief in Marxism (Xinyang weiji), and the crisis of trust in the party. It created and etched a narrative of a ‘century of humiliation’ in public memory as a historical fact. As such the very legitimacy of the CPC within Chinese politics is based upon an imaginary enemy or a threat perception. Thus, it is the domestic politics guided by the party brand of nationalism shaping public opinion that in turn directs China’s foreign policy behaviour.

Mercantilist China’s Going Global Strategy

Capitalism has long established a global market. With the growth in capital exportation and the expansion of foreign and colonial ties and spheres of influence by large monopolistic associations, there was a natural progression towards international agreements and the formation of international cartels. This led to a distinctive era of world colonial policy, intimately associated with the “latest stage in the development of capitalism” characterised by finance capital. In this era of finance capital, the competition for control over semi-dependent countries became particularly intense, as the world had already been partitioned. The concept of the “global South” reflects this division that defines and dominates these regions. Although the Western forces still wield considerable sway in the global South, China has risen as a formidable power within this collective. Imperialistic entities pursue foreign markets to alleviate domestic socio-economic pressures. The dominance of finance capital has facilitated mobility and heightened the reliance of Global South nations on external economies. In the 19th and 20th centuries, the international political economy was dominated by British colonialism and US-led imperialism, respectively. China’s rise in the 21st century mirrors the trajectory of past imperial designs by dominant powers. This section aims to link China's mercantilist imperialism with its Belt and Road Initiative (BRI), a key element of its strategy for global expansion. It will also examine how mercantilist capital, fuelled by export surpluses and debt diplomacy, influences and steers China’s imperial design.

The “go global” strategy was officially launched in 2001 and primarily aimed “to foster a closer relationship with commodity-producing countries and thereby secure the raw materials the country urgently required for its economic growth and huge programme of urbanisation”. In its quest to fuel its firing growth engine, China has repeated the history of British colonialism. It seeks to create a trade dependency among low- and middle-income countries on China by incurring huge infrastructure expenditure in these countries under BRI to ease the movement of raw- materials to fuel its factories. China supports infrastructure projects in strategically located developing countries, often by extending huge loans to their governments. As a result, some of these countries are becoming saddled with debt, leaving them even more firmly under China's thumb. The projects China supports are often intended not to support the local economy, but to facilitate Chinese access to natural resources, or to open the market for its low-cost and shoddy export goods. According to an earlier analysis by Pardee Centre for International Futures, from 1992 to 2020 the number of countries over which China had more influence than America almost doubled, from 33 to 61. From 2000 to 2021 it funded more than 20,000 infrastructure projects, many of which were under the BRI, across 165 countries with aid or credit worth $1.3trn.  

The Weaponisation of Economic Dependency through Export and Debt Diplomacy

In an interconnected world, it gets harder all the time to separate economic threats from military threats to nation-states. Weaponisation of interdependency is interwoven in such an interconnected political economy. Generally speaking, military goals are executed through economic instruments such as economic sanctions, economic and security blocks, debt diplomacy, and the trade war. For instance, China has leveraged its economic influence to push Cambodia, Laos, Myanmar, and Thailand to prevent a unified ASEAN position against China's assertive territorial claims in the South China Sea. Today, neo-mercantilism accounts for a more complex world marked by intensive interdependence where states use a wider variety of instruments—especially economic ones—to protect their societies. These measures include capital controls, and interest rates changes, increasing use of non tariff barriers (NTBs) such as complex government regulations about health and safety standards, licensing and labelling requirements, and domestic content requirements that block certain imported goods.

According to a 2021 White House Report, U.S. cell manufacturers are expressing concerns over the material prices from Chinese suppliers below the standard market rates. The European Union has reported the discovery of "substantial evidence" indicating that Chinese government agencies have been illicitly subsidising exports. Numerous products priced below cost and substantial subsidies from the Chinese government prompt questions regarding trade practices. Chinese government subsidies and other policy support have encouraged solar panel and electric vehicle makers in China to invest in factories, building far more production capacity than the domestic market can absorb. China has used its dominance in the lithium market to block competitors by employing anti-competitive tactics, such as subsidising production during low demand and flooding the global market with underpriced products. Similar strategies have been applied to other vital minerals like cobalt, graphite, and nickel, essential in the production of various electronic devices.

The revisionist China is bent on restructuring a Chinese world order being shaped by the tributary system. It started from the Han Dynasty (202 BC–220 AD) and seems to be rejuvenated with the ‘debt trap diplomacy’ of the Belt and Road Initiative (BRI). Basically, through the BRI, China wanted to resolve two major concerns, viz capital surplus and industrial overcapacity. Thus, it was the economic might that seemed to drive geopolitical narratives. It was also about increasing Chinese political influence in broader regions. In the decade since, the project has expanded to Africa, Oceania, and Latin America, significantly broadening China’s economic and political influence. 

By June 2023, China had signed more than 200 BRI cooperation agreements with more than 150 countries and 30 international organizations across five continents, yielding a number of signature projects and small-scale yet impactful projects. From 2013 to 2022, the cumulative value of imports and exports between China and BRI partner countries reached US$19.1 trillion, with an average annual growth rate of 6.4%. The cumulative two-way investment between China and partner countries reached US$380 billion, including US$240 billion from China. China-led BRI has wider implications across the world. The flagship $1tn global infrastructure initiative - the biggest multilateral development programme ever undertaken by a single country - was a chance to further embed China’s influence across the developing world.

However, in the five years from 2014, more than 75% of total BRI spending on construction projects went to autocracies. China has used debt rather than aid to establish a dominant position in the international development finance market. For instance, the China-Pakistan Economic Corridor (CPEC) was conceived over the framework of ‘all-weather friend’ that ties between the two nations were deeper than the ocean and higher than the Himalayas. Yet, 91% of the revenues to be generated from the Gwadar port as part of the China-Pakistan Economic Corridor (CPEC) would go to China, while the Gwadar Port Authority would get a 9 percent share in the income for the next 40 years.  Moreover, 40 percent of the projects in the China-Pakistan Economic Corridor (CPEC) — lionised in July by Xi as “an important flagship” for the entire BRI — have run into troubles including corruption, cost overruns, funding shortfalls or adverse environmental impacts.  

Moreover, the Chinese approach of not partnering with local companies is not going to help create new job opportunities for millions of Pakistani youths. Since Chinese companies are tax-exempt, they bring everything from China, including labour, and hence they will have no reliance on Pakistani businesses to fulfil their demands. It essentially renders Pakistan a client state of China. From the start, many in Pakistan worried that CPEC was a neo-colonial project that would give China control over Pakistan, like the British East India Company through which the British colonized the Indian Subcontinent. China lends money to those countries, which end up having to cede control of key assets if they can't meet their debt repayments. For instance, in 2017, Sri Lanka agreed to give state-owned China Merchants a controlling 70% stake in the Hambantota port on a 99-year lease in return for further Chinese investment. Moreover, most of the major industrialised nations share information about their lending activities through membership in what's known as the Paris Club. China has not joined this grouping.

It creates a tributary system with China at the top that reflects suzerainty rather than a sovereignty system. In the tributary system, tributary states acknowledged China’s superiority and received the right to trade with China and access to the large and lucrative Chinese market. Moreover, research by AidData reports that approximately half of China's loans to developing nations are not reflected in official debt statistics. Funds are frequently not recorded on government balance sheets but are instead channelled to state-owned enterprises, banks, joint ventures, or private institutions, rather than being transferred directly from government to government. According to AidData, over 40 low and middle-income countries now have debt exposure to Chinese lenders exceeding 10% of their annual GDP, a situation attributed to "hidden debt."

The Compromised Sovereignty of the Global South amid China's Trade and Debt Diplomacy

The influx of Chinese loans and exports enhances China's presence in key geographic regions. This raises questions about whether China is leveraging its economic strength to sway the strategic decisions of the borrowing nations. Over the past three decades, China's rapidly expanding economy has also bolstered its military and diplomatic reach, leading to speculation that it is extending credit to developing nations to invade the sovereignty and secure strategic locations for its imperial ascendance. For example, China utilises debt leverage to fulfill three enduring strategic objectives: securing a series of ports to extend its influence throughout South Asia; weakening the U.S.-led resistance to its disputed South China Sea assertions; and contesting the U.S. naval supremacy in the Pacific. Moreover, the military bases in Djibouti, Hambantota, the Maldives, and Pakistan's Gwadar port are all confronting the common issue of rising Chinese sovereignty. This has significant implications for political and military outcomes along naval borders, stretching from the Bab al Mandab, through the neighbouring Red Sea and Gulf of Aden, to the broader expanses of the Indian Ocean. By paraphrasing Nelson Mandela's words, "After ascending a great hill, one aspires to climb many more hills." 

In September 2020, the China Southern Power Grid Company (CSG) acquired a majority stake (approximately 90 per cent) in Électricité du Laos Transmission Company Limited (EDL-T), which is in charge of the domestic electricity transmission grid of the nation. China's land acquisition and the significant share in EDL-T influence the upper echelons of EDL-T's decision-making process. China-Kenya terms of the loans ‘specify that the port’s assets are collateral; thus, Kenya’s sovereign immunity does not protect them, due to a waiver in the contract. Countries rich in natural resources, like Angola, Zambia, and the Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors. Additionally, China's "debt trap diplomacy" is alleged to be recolonising African economies by advancing its interests and tilting the trade balance in its favour. Recolonisation extends beyond territorial acquisition or border incursions to include cultural usurpation as well. The latter is also viewed as an effective way to promote an understanding of China’s ideals, support Chinese economic goals and enhance Chinese national security in subtle, wide-ranging, and sustainable ways. 

The World Bank’s International Debt Report 2023 illustrates a significant rise in the debt South Asian, African, and South American nations owe to China since the 2010s. It attributes this increase to China’s ‘Going Global Strategy’ launched in 2001 to boost Chinese investments and loans overseas. By the end of 2022, low-and-middle-income countries had accumulated $180 billion in debt to China. This figure is slightly lower than the $223 billion owed to the International Bank for Reconstruction and Development (IBRD), owned by 189 member nations. Countries like Nigeria & South Africa (83 per cent), Ecuador (77 per cent), Laos (79 per cent), Angola (72 per cent), Cambodia (60 per cent), and others have incurred significant external debt to China. In South Asia, the debt to China escalated nearly sevenfold in 11 years, from $6.4 billion in 2012 to $42.9 billion in 2022, with Pakistan accounting for two-thirds of this amount. Pakistan's external debt to China jumped from $7.6 billion in 2016 to $26.5 billion in 2022. During the same timeframe, Sri Lanka’s debt to China nearly doubled from $4.6 billion to $8.8 billion, Bangladesh’s rose from $0.97 billion to $6 billion, Maldives’ from $0.3 billion to $1.2 billion, and Nepal’s from $0.07 billion to $0.26 billion.

A large portion of these debts are loans for infrastructure projects. Over 72 percent of Pakistan's external bilateral debt is owed to China, with the Maldives at 68 per cent, Sri Lanka at 57 percent, Nepal at 27 per cent, and Bangladesh at 24 per cent. (International Debt Report (worldbank.org)). Additionally, Chinese loans typically feature commercial interest rates that average around 2.5 per cent, have a maturity of 10-15 years, offer no grace period, and use the renminbi as the debt currency. In contrast, The International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) offer resources on highly concessional terms, including zero interest, extended grace periods, and long-term maturities, making these credits more manageable for borrowers to repay. 

China’s strategy of debt diplomacy and economic engagement targets the vulnerabilities in low and middle-income nations. Following WWII, the persistent divisions left by Western imperialism were further complicated by the emergence of neoliberal policies promoting state withdrawal. China aims to strengthen its influence, anticipating that these dynamics will persist. China's significant role in the globalised world has often led to a shift from globalisation to increased dependence. This is evident in China's growing trade surplus and financial ties with the Global South. While China’s exports to developed markets have plateaued, they have surged in the global South. Part of this growth in the developing world can be attributed to a new form of triangular trade, spurred by the 25 per cent tariffs on around $200 billion worth of Chinese imports imposed by the Trump administration in 2019.

China exports components and capital goods to countries like Mexico, Vietnam, and India, which then turn them into final products destined for the American market, thus deepening America’s reliance on Chinese supply chains. The study by Baldwin et al. (2023) indicates that the United States sources approximately 87 percent of its intermediate inputs domestically, with the remaining 12 per cent coming from international sources. In contrast, India's manufacturing sector in 2022 had about 17 per cent foreign exposure, with 83 percent of intermediate inputs sourced within the country. Notably, China represents an average of 23 percent of all foreign inputs for India, which is over three times more than the United States, the next largest supplier at 6 percent. Historical data from 2000 and 2012, in addition to 2022, show an increasing trend in India's look-through exposure to China, despite a decrease in face-value exposure. Specifically, the proportion of foreign inputs from China in Indian manufacturing has surged from 5 per cent in 2000 to 23 per cent in 2022. 

Additionally, China has adopted a strategy of rerouting shipments through nations that have “friend-shoring” relationships with America. Chinese components are increasingly being sent to countries such as Vietnam, Malaysia, and Mexico, where they are processed to be considered products from those countries. These processed goods are then shipped to the United States and the European Union, where they face low or no tariffs. There has been a significant increase in the proportion of Chinese imports to these friend-shoring countries, as Chinese state-owned enterprises establish subsidiaries and export intermediate parts and components to them. For instance, China’s exports to the ASEAN (Association of Southeast Asian Nations) bloc have grown in 69 out of 97 product categories. In Mexico, 40 per cent of offshore investments in the automotive manufacturing sector are from China, with exports more than doubling compared to five years ago. Therefore, the endeavour to “de-risk” trade with China is far from straightforward. Consequently, lower and middle-income countries in the global South have been unable to develop domestic solutions to counter Chinese influence. 

Conclusion

China’s debt diplomacy and mercantilist trade policy have resulted in the weaponisation of trade and compromised the sovereignty of the Global South. The example of Pakistan, Laos, Sri Lanka and Kenya has much fire to fuel the speculation of China’s growing influence. Moreover, China’s strategic bases of Djibouti, Hambantota, Mombasa, Maldives and Gwadar, signal Chinese invasion over the sovereignty of the independent states. China’s imperial ambitions in the Global South are evident in its global strategy, reflecting the party-state’s nationalist drive to achieve its ‘great rejuvenation’ and address three crises of belief. Furthermore, China, both authoritative and mercantilist, is poised to replicate historical imperialism to secure raw materials for its industries. It has heavily invested in infrastructure in low-and-middle-income countries through loan-sharing agreements, disregarding their ability to repay, leading to their entrapment in debt and dependency. The theories of Marx, Schumpeter and Lenin aid in deciphering China’s imperialistic approach, illustrating how a mercantilist China seeks foreign markets for its goods in return for raw materials.