SVE NEWS & CNN Sharing Series – Weakened by the trade war, Xi returns to security conference ready to woo Modi and Putin

Hong Kong (CNN)Smiling broadly as he strode into the Shanghai Cooperation Organization (SCO) summit in June 2018 alongside a group of world leaders, Chinese President Xi Jinping had never looked stronger.

Less than one week later, however, the United States imposed its first tariffs on tens of billions of dollars of Chinese goods, kicking off what would become a raging global trade war between the world’s two largest economies.

On Friday, Xi returns to the SCO under markedly different circumstances.

Now more than ever, the Chinese leader will need to solidify ties with allies amid an escalating trade war with President Donald Trump’s administration and a slowing domestic economy.

In the Kyrgyzstan capital Bishkek, Xi is expected to meet with his “best and bosom friend” Russian leader Vladimir Putin and a newly reelected Indian Prime Minister Narendra Modi, fresh from his landslide victory in May.

While it’s reasonable to think Xi will be seeking their endorsement and support, China’s relatively diminished position also increases the bargaining power of the SCO’s other participants.

Chinese President Xi Jinping with other world leaders at the 18th Shanghai Cooperation Organization (SCO) Summit on June 10, 2018, in Qingdao, China.

“It gives all those countries an opportunity to see if they can actually get something out of the Chinese,” said Steve Tsang, director of the China Institute at SOAS University of London.

“They see that Xi Jinping probably feels a bit more vulnerable than he was a year ago.”

Shoring up allies

Founded in 2001 as a forum to resolve border disputes in Central Asia, the annual SCO has grown rapidly in both membership and scope.

According to Chinese state media, its eight permanent members — China, Russia, India, Pakistan and four Central Asian states — account for “nearly half the global population, and over 20% of global gross domestic product (GDP).”

As a result, the forum has become a key place for members to thrash out security and economic issues in the region.

“If you have (an economic) decoupling between the US and China in a globalized world, you want to have more allies on your side than on the other side, even if they’re not formal allies but countries that are willing to work with you,” Tsang said.

With Putin and Xi’s close relationship reaffirmed in Russia this month, the Chinese leader will likely be turning his attention to Modi.

China and India have often had a fractious relationship, almost coming to blows in 2017 over a dispute on their Himalayan border near Bhutan. But in the past two years, in the face of growing pushback from the United States, Xi and Modi have sought to strengthen ties, including meeting for an informal summit in Wuhan in April 2018.

“The Chinese want to see their economic relationship with India grow, particularly if they could get the Indians to use Huawei technology for their 5G network,” Tsang said. “It would certainly be very useful for the Chinese government in terms of sustaining Huawei as an alternative to the West.”

Earlier this month, Huawei signed a deal with Russia’s largest telecoms operator, MTS, to develop 5G technologies and launch a fifth-generation network in Russia within the next year.

Unlike in the West where security concerns around Huawei have led to stalled or blocked deals, authorities in India have so far shown little public resistance to the involvement of Chinese tech companies in the country’s 5G infrastructure.

More broadly, Modi has made it known that he is open to foreign companies investing in India’s economy.

Foreign direct investment into India has risen from less than $25 billion in 2014 — before Modi took power — to around $45 billion in the past fiscal year.

One big success story has been the smartphone industry, which has helped drive a boom in India’s digital economy. China’s Xiaomi has tripled the number of smartphone plants it has in India in recent years, and is now on its way to taking top spot in the country’s market.

But although China is India’s largest trading partner, their estimated $84 billion bilateral trade in 2017/18 was a mere fraction of the US-China trade volume, which stood almost $600 billion.

Belt and Road

Many integral members of Beijing’s flagship Belt and Road initiative, which aims to export Chinese commerce, goods and influence across the globe, will also attend the SCO, making the event increasingly important to the Chinese government.

“It’s the security arm of the Belt and Road,” said Richard McGregor, senior fellow at Sydney’s Lowy Institute. “It’s a vehicle for the Chinese to secure the hinterlands, as it were, to get greater military experience and expand their strategic space.”

The Belt and Road is the massive infrastructure policy, pioneered by Xi, which seeks to build trade corridors through rail, road and ports between China, Europe, the Middle East and the rest of Asia.

A vital component of the land trade route, the “Silk Road Economic Belt,” runs through Central Asia.

Many Central Asian countries have struggled to fully integrate into the global economy following the collapse of the Soviet Union. The promise of large-scale Chinese infrastructure investments — including the creation of massive rail lines connecting Western Europe with China via Central Asia — have helped to strengthen ties and promote China as a dependable regional partner.

Ahead of Friday’s forum, Chinese state media has been keen to trumpet the policy’s achievements.

“The BRI, now in its sixth year, can bring the SCO members both the ‘belt’ of security and ‘road’ to development in the face of rising trade protectionism and economic nationalism to achieve lasting stability and common prosperity,” said state media Xinhua.

The Belt and Road also helps to shore up support for China’s policies in Xinjiang — a far western Chinese region that borders several Central Asian countries — where according to the US State Department, up to 2 million ethnic Uyghurs, Kazakhs, Kyrgyzs and other predominantly Muslim minority groups have been held against their will in massive camps.

In March this year, a prominent human rights activist and China critic based in Kazakhstan, was arrested by Kazakh police and charged with inciting ethnic strife, according to his lawyer.

But China has faced increasing pushback from partner countries around the world over the Belt and Road, including accusations of unreasonable debts and impractical projects.

Tsang said Xi is likely to face complaints behind closed doors at the SCO on Friday and Saturday from Central Asian countries over their dissatisfaction with the cost of Belt and Road projects, and the mountain debt associated with them.

“The Chinese like to say it is ‘win win’ but it could be lose lose for major projects that are not responsible, that the recipient country can’t pay back,” Tsang said.

 

Updated 0508 GMT (1308 HKT) June 14, 2019

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