Why China participates in regional governance of Central Asian - a perspective on regional public goods

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Why China participates in regional governance of Central Asian - a perspective on regional public goods

Cai Yao

postgraduate student

the Department of Country Studies

Institute of International Relations

Taras Shevchenko National University of Kyiv

(Ukraine, Kyiv)

The current problem. In the current 21st century, Economic Globalization provides preponderant opportunity for regional integration. With the increased geostrategic positions and energy advantages in the Central Asia region, external powers are paying more attention to this region. The five Central Asian countries must continue embracing regional cooperation and development to enhance their influence. After independence, Central Asian countries actively carried out mutual cooperation, which boosted the regional integration processes. However, given the lack of regional public goods, there are huge internal differences in Central Asia. Indeed, the region is facing many kind of non-traditional security-challenges. On the other hand, external forces tend to influence regional affairs. Consequently, solving disharmony and contradiction in regional development becomes a regional governance issue, which should be solved by all Central Asian countries. The stability and development of Central Asia strongly influence neighboring countries.

China understands the importance of Central Asian, and actively participates in the region's affairs. As an extra-regional state, China endeavors to propel the regional integration development and underpin a kind of regional order with other countries. Under the backdrop of China's national strategy «the Belt and Road», how to explain and understand China's participation in Central Asian affairs is an important issue for research of this area. This article will analyze China's policies in the Central Asian with a view of regional public goods, and this analysis perspective becoming more and more a influential opinion of international studies in China.

Theoretical analysis and literature review. In International Economics, regionalism refers to regional economic integration. As a part of the global governance system, regionalism plays an important role in regional and cross-regional governance [1, p. 91-130]. Regional governance refers to the co-management system in regional common services, as constituted by sovereign states, international organizations and other international actors. Regional governance is a requirement for national governance, and also the approach to participate in global governance [2, p. 47-54]. National governance, regional governance and international governance are the three primary dimensions of global governance.

There are two kinds of regionalism theories: the transnational paradigm and the state-centric paradigm. The former emphasizes on the functions of mechanisms, systems and culture while the latter is the result of rethinking the state-centric paradigm. The Functionalism (Neo-functionalism) and the Inter-governmentalism (Liberal Inter-governmentalism) are respectively typical representatives of two regionalism theories. However, both have a common background: experiences and histories of the European. Notably, regional development is a complex process, and these theoretical paradigms cannot explain the changing realities. In this regard, two paradigms have began to move toward a comprehensive paradigm, for example, the Neofunctionalist Ernst Haas accepted `Reason of State' form Inter-governmentalism [3, p. 34-56].

The Public Goods theory provides a new method for researching regional issues, and has been widely used in international relations research. The theory considers that, regional cooperation and integration are facing different levels of challenges from public issues, and as such, effective supply-system should be conducive to public issues and regional integration. On the other hand, providing global public goods is impeded by free-rider-problem and «privately owned goods». However, the regional public goods - with characters of club goods - will effectively solve these problems and make regional cooperation more active. The level and rational structure of supplying regional public goods has over time become a source of regional cooperation and integration, as well as the foundation of regional order.

Under the program, a regional public good is any good, commodity, service, system of policy regime or anything else of which shared benefits for participating countries and whose production is a result of collective action by the participating countries.

Externality is a consequence of an economic activity experienced by unrelated third parties. Externalities are also referred to as spillover effects. An externality exists whenever the welfare of some agent (either a firm or a household) depends directly, not only on the agent's activities but also on the activities under the control of some other agent [4, p. 201]. There are two types of externalities namely the negative and positive externality. The negative externality arises when there is an uncompensated cost that an individual or firm imposes on others while the positive externality arises when there is an uncompensated benefit that an individual or firm confers on others. A negative externality is a cost that is suffered by a third party as a result of an economic transaction. A negative externality is also referred to as an external cost. In a transaction, the producer and consumer are the first and second parties, and third parties include any individual, organization, property owner, or resource that is indirectly affected.

In economic activities, government always promote internalizing the externality with specific economic policies that motivate actors to consider externalities of their own behaviors. There are two ways to address positive externality - private solution that is based on Coase theorem and public policy that is focused on externality. In the international community, there are no corresponding organization. Thus, international public goods are often supplied shortly and their negative externality is difficult to avoid. Negative externality is a primary cause for internal and external feuds as actors participate in the regional integration to make arrangements to share public goods. Externalities are naturally transnational or interconnected hence can only be solved and addressed through international cooperation [5, p. 87].

Ukraine's international relations scholars and experts have done a lot of research results on the relation between China and Central Asia. For example, the researcher analyzed competition and cooperation in Central Asia of the major geopolitical players and region states, the author pointed out that Central Asian countries have the common interest foundation for promoting regional integration, and SCO played a big role [6, p. 739-743]. The other one scholar made a summary of research actualities by Chinese academics in the Central-Asia studies, the researcher noted that China's research community of international relations has made more studies on diplomatic and national security policies [7, p. 45-48]. About this issue, we need pay attention to these articles of Ukrainian researchers: «Safety of Central Asia: between Russia and China» [8, p. 160-167], «Military-political relations of Russia, the USA and China with the countries of Central Asia» [9, p. 116-124], «Central Asia as a zone of intersection of the interests of rival powers: the prospect of rivalry and interaction» [6, p. 739-743], «Geo-economic growth of China in the modern world» [10, p. 42-60] etc.

Motivational analysis about China's participation in regional governance of Central Asia. After the collapse of the USSR, Central Asian became an independent geopolitical unit in the international political system. Given the political imbalances of different countries and regional public problems, none of the Central Asia countries can solve the regional problems, alone. The key of solving regional development problems is regional integration. The division of water resources is a key problem in Central Asia, and it is a typical problem of the «Tragedy of the Commons». Environmental degradation of the Aral Sea in Central Asia has caused loss of livelihoods for many. It has led to competition for resources (water) among the states sharing the basin, especially Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. In a 1992 Agreement on Joint Activities in the Aral Sea, the five states around the Aral Sea and its rivers agreed to establish a regional committee to manage Aral Sea and its resources and also water allocation. Although there has been some transboundary agreements toward comprehensive Aral Sea resource management, the agreements have not been entirely successful. They have been successful to varying degrees. The key challenge is that States prioritize their individual economic and livelihood security over regional development [11, p. 1363-1375]. Security challenges are a serious crisis for Central Asia. For instance, all Central Asian countries have multinational society; they have territorial disputes, face growth of religious extremism. At the same time, three Central Asian countries are bordered by Afghanistan, which also represent security challenge in the region. Central Asia is also in the category of the sub-regions most vulnerable to natural hazards due to its geographic and climatic features. The region is prone to not only earthquake, flooding, and mudslides but also technological and man-made disasters.

The negative externalities of a slow regional integration process in Central Asia are summarized in the following three aspects:

First, structural imbalance of economic development restricted regional cooperation in Central Asian after independence. Given the distinctive resource endowment, investment decisions and socio-economic reforms in the five Central Asia countries, their economic development situations are very different [12, p. 59]. Raw materials and minerals are Central Asian country's main exports. Their main imports include industrial manufactured goods form China and Russia. In this consideration, it becomes difficult to form a closer regional economic integration.

Second, the lack of effective national capacity makes some areas uncontrollable by the government of Central Asia. These areas become breeding grounds and springboards for transnational crime and terrorism. The convergence of ethnic groups, narco-traffickers, insurgents, and terror organizations is a new regional challenge in Central Asia [13,p. 380-393].

Third, regional public issues are solved inefficiently, and this problem may lead to new conflicts in Central Asia. Contradictions of resource, territorial, and ethnic issues are very deep and complex in this area. These issues cannot be solved by one or two countries, yet their impact will be shared by the whole region.

In short, the process of integration is not only related to development of Central Asia countries, but also the impacts of regional stability and security.

On the other hand, China is facing the neighborhood diplomatic plight. Dual structural contradictions caused by the growing strength in global and regional levels fundamentally restrict the achievement and effectiveness of improving China's relations with neighboring countries. Because they satisfy the regional need and follow the principle of beneficiary pays, regional public products not only have avoided privatization of big countries and freeride of small countries, but also have promoted regional cooperation, cultivated political mutual trust, and built a stable regional order to help solve many neighborhood diplomatic problems [14, p. 37-55].

Mechanism analysis about China's participation in regional governance of Central Asia. A discussion of the supply modes of regional public goods should be pegged on public goods research. There are two regional public goods models. The first is the «Leviathan» model, which is based on the assumption that avoiding the tragedy of the commons effectively is not possible without an external Leviathan. This theory considers that the effective supply mode of public goods is dominated by the Central authority, thus, the Central authority must have sufficient information. The second one is «privatization». This theory recommends solving supply problem in public products effectively with coercive private method. Ostrom discusses the defects of the two supply theories, and points out that there is not a single solution in reality. The empirical alternative methods are always synthesis of different methods [15, p. 22-44].

In the practice of international relations, we often find that extra-regional nations, especially extra-regional powers are often involved in intra-regional cooperation. These actors seek for supply and consumption of regional public goods. The reason behind this phenomena is that «externalities» of regional public goods - regional events - impact not only the intra-regional states, but also the interests of extra-regional countries. Therefore, extra-regional actors are willing to participate in regional affairs and share the cost of regional public goods with intra-regional states [16, p. 143-152]. In view of Ostrom's discussions on supply modes of public goods, this article will divide supply modes of regional public goods into two types: the Dominant Supply Model and the Regional Confederate Supply Model.

Providers of the Dominant Supply Model are always intra-regional powers, extra-regional powers and hegemonic powers. Just like public goods, the regional public goods face the high cost problem but the general states are unwilling or unable to bear. Therefore, only powers willing to supply more regional public goods, of course, for their own interests willingly bear the cost. Externalities of regional public goods is a motivation for these powers. The Dominant Supply Mode is based on common interests between powers and regional actors. In this mode, the major powers will tolerate other countries' free-riding behavior to some level in order to acquire the other country's identification, as well as the corresponding benefits of regional institution, honor, cultural impacts and others aspects. According to the number of principal supply actors, the Dominant Supply Model can be divided into the Powers' Cooperative Supply Mode and the Single Supply Mode. The former refers to powers of Franco- German cooperation in the European integration process; the latter is a system of regional order, such as the North American Free Trade Agreement.

The Regional Confederate Supply Model pertains to regional cooperation in regional affairs. Costs and earnings of regional public goods are assumed by regional actors. In this model, the public goods change to private goods of the regional states with regional organizations and institutional arrangements. However, in a small group, there is also the tendency for actors to willingly supply collective good less than the optimal level. As group members increase, the distance of the optimal level also increases. Therefore, a large group's efficiency is generally lower than that of a small group [17, p. 53-56]. The provider of regional public goods are numbered. These actors have similar interests and face similar common public problems, and can easily form a mutual supervision mechanism. In comparison to global public goods, the regional public goods are more easily achieved.

The supply models of regional public goods differ in the global affairs. National relations and interests are intertwined in the world of globalization. This situation causes complexities in the regional public goods. The demands for regional public goods in Central Asia are multi-leveled. This peculiarity is the manifestation of the complex situation. It is a challenge for supplying regional public goods in Central Asia.

First, regional goods of security: After independence, ethnic and religious conflicts spread across Central Asian. In addition, spillover effects of Afghanistan problem have had a huge effect on regional security in Central Asia. Similarly, terrorism, ultra-nationalism and religious extremism are permeating fast in this area. These problems are threatening and damaging the security of Central Asia. Regional security issues are seriously perplexing regional countries.

Second, regional public goods of development: Resource endowments and economic development in Central Asia countries are greatly imbalanced. The shortage of water resource is impacting national relationships [18, p. 52-59]. Besides, investment risks cannot be ignored in this area. These problems aggravate the difficulty of economic transition and development [19, p. 75-79, 60-68, 50-55].Third, regional public goods of international institution: Central Asia countries, have pursued neutralism, participated in different regional integration organizations and signed a series of agreements about regional integration. Nonetheless, the Central Asian Cooperation Organization has been displaced by the Eurasian Economic Community. These cooperation agreements, organizations, and institutions of Central Asia states, in all these ways, failed to coordinate region development and promote the level of regional integration.

Central Asia has important meaning for China, as these regions were connected by «the Silk Road» many decades ago. After the collapse of the USSR, friendly relations quickly established between China and the Central Asian States. The Shanghai Cooperation Organization (SCO), which was established in 2001, has become a typical symbol of relationship between China and Central Asia. Today, China has become an important trading partner and investor in Central Asia's, gas and oil resources industries. Central Asia has become an important energy source for China.

China's president Xi Jinping launched «the Silk Road Economic Belt and the 21st-Century Maritime Silk Road» («the Belt and Road») initiative in 2013. The project was aimed at connecting major Eurasian economies by promoting infrastructure, trade and investment. The initiative was later specified to contain two international trade connections: The land-based «Silk Road Economic Belt» and oceangoing «Maritime Silk Road». An effective platform for regional cooperation will fully rely on China's and relevant countries' existing bilateral and multilateral mechanisms. The project aims to use the historical symbol of the ancient Silk Road of peaceful development, to hold high the banner of economic partnership. It will help to actively develop political trust between countries and promote economic integration, cultural inclusivity, the fate of the community and community responsibility. China's Central Asia policy has a process of contacting, forming and transforming Central Asia. The history can be divided into three periods or stages:

Stage 1 (early 1990s) - the establishment of SCO in 2001. With the collapse of the Soviet Union, China began efforts to establish and strengthen partnerships with Central Asia countries. The first round of the Shanghai Five took place on April 26, 1996. China and other former Soviet states: Russia, Kazakhstan, Kirghizia and Tajikistan met in Shanghai to discuss security confidence-building measures in their borders. China and these countries share borders of over 7,000 kilometers in length. For historical reasons, there were quite a few areas of disputes along their borders. The Shanghai Five has helped resolve the border problems between China and the other four countries. The Shanghai Five has created a multilateral mechanism for airing concerns and coordinating various activities. This mechanism became a predecessor of the SCO.

Stage 2 - from the establishment of SCO in 2001 to the launch of the «Belt and Road» in 2013. In this stage, security and economic cooperation were growing quickly between China and Central Asia countries. The creation of the SCO in 2001 allowed the institutionalization of cooperation in the security field among the regional players (China and Russia) and Central Asia republics, in order to fight common security threats. The group's professed purpose is to promote cooperation between its members in various social, cultural, security and economic venues and stresses the goal of combating the «Three Evils» of Terrorism, Extremism and Separatism. The main goals and objectives of the SCO are to strength mutual trust, friendship and good-neighborliness between the Member States and to promote the development of multidisciplinary cooperation in the maintenance and promotion of peace, security and stability in the region; all this to formulate a new, democratic, just and rational international political and economic order. One of the most important aspects is the fight against drug trafficking and arms trafficking, other transnational criminal activities and illegal migration. SCO also focusses on issues such as the promotion of effective regional cooperation in political, trade, economic, defense, law enforcement, environmental protection, culture, science and technology, education, energy, transport, credit and finance, and other areas of common interest.

Stage 3- after launching the «Belt and Road» in 2013: The Chinese President Xi Jinping visited Central Asia and Southeast Asia in September and October of 2013 and launched the «Belt and Road» project. The project was a centerpiece of the Chinese leadership's new foreign policy. As China's important foreign strategy, the one very important goal of «the Belt and Road» is to promote regional economic integration [20]. China attaches great importance to the Central Asia region because of its strategic significance (geographical location) to China's national strategy and interests. While China is in urgent need of energy resources and markets, Central Asia is in dire need of huge investments for development.

In the «Belt and Road» strategy, Central Asia regional integration can be regarded as a regional governance conception. Looking through China's international identities, national power and traditional cultural mentalities, we can draw a conclusion that China will still be a regional power in the future. The «Belt and Road» strategy is mainly a regional governance policies, rather than a global strategy [21, p. 4754]. China attaches great importance to security and stability, especially given that turbulent situation would affect security and development of China's northwestern region. In other words, China has gradually become the major participant in Central Asia's regional security.

In Central Asia, the supply of regional public products is facing many unfavorable factors. China's «Belt and Road» strategy proposed solutions for the regional integration. Regional public goods are key to regional cooperation. Promoting regional integration and trans-regional cooperation are some of the important goals of «Belt and Road» strategy. Given the background of this strategy, China's policies in Central Asia Regional governance can be viewed from the following five perspective.

First, the «Externality» rather than geopolitical or regional hegemony is China's intrinsic motivation in Central Asia affairs. Although supplying regional public goods emphasize collective action, some regional powers tend to supply regional public goods by themselves. This happens when a state pays more attention to regional public goods than others actors, or rather when some international relations actors are more sensitive to regional public issues. Some actors willingly tolerate the cost of «free rider problem» to achieve regional governance. These powers will also obtain some political reputation compensation.

Second, the principle of non-interference is still China's fundamental policy in Central Asia. China brands itself as a responsible great power that respects the sovereignty of other States, unlike the Western countries which unnecessarily intervene in other country's social system, development, domestic policies and foreign affairs. China's basic views about the international relations are obviously influenced by its own history and sensitive issues, such as Taiwan, Tibet and Xinjiang. Although China is becoming more flexible in explaining the principle of non-interference [22], and willing to take a more active role in international conflict, China still sticks to the principle of multilateralism in supplying regional public goods. This way, it provides possible solutions for great powers to participate collectively in regional governance.

Third, the cooperation to maintain regional security, economic cooperation (to promote regional common development) and public diplomacy (to enhance the international image) are the three main aspects of Chinese diplomacy in Central Asia. The main objective is to secure collaboration in the fight against terrorism. Expanding and deepening cooperation among SCO is a consistent viewpoint of Chinese government [23]. Economic cooperation should be achieved through the free trade zone, investment in infrastructure, the development of resources, and the connection of communication network. In recent years, the Public Diplomacy has become an important field in the Chinese foreign policy. China will do more to support regional assistance projects and bilateral cultural relationship in Central Asia.

Fourth, constructing regional cooperation mechanisms and regional security mechanisms of Central Asia are important goals in China's policies. Overall, building cooperation institutions is more positive than simple investment in regional cooperation. Supplying regional public goods and building coordination mechanisms between different international actors is not possible without international institutions and international mechanisms. International mechanisms can influence the actions of states by advocating international standards and regulations. International mechanisms can make each of the participating countries to accept these standards and regulations through persuasion, social influence and imitation [24, p. 45-49]. For now, the SCO and the Asian Infrastructure Investment Bank (AIIB) are useful mechanisms in which China and other regional actors actively participate to promote integration in the Central Asia region.

Fifth, on the question of how to build pattern for supplying regional public goods in Central Asia, China has been trying to expand the regional border by means of international organization and cooperation. The goal of China's policy is to build a regional confederate supply model. China always tries to avoid conflicts with Russian or USA in the Central Asia. Thus, China has discarded the Dominant Supply Model, characterized by the peculiarities of the hegemonic stability theory. As an extraterritorial actor, China's participation and activity are easy to cause alarm and attention to regional states and other powers. However, China lacks the traditional influence enjoyed by Russia in Central Asia. Therefore, China's Central Asia policy is more focused on playing the role of international organizations and institutions. China attempts to bring Central Asia countries into the range of regional governance, and to dilute influence of Russia and USA. The ultimate goal of China's policy is to build a regional confederate supply model through international harmonization. Compared with Russia and the United States, China has paid equal attention to Central Asia. Nonetheless, China has established a geographical advantage which the United States does not have. Similarly, China has the advantage of providing more regional public goods to Central Asia than Russia. These advantages are the basis of deepening function of the SCO and supporting the organization to expend membership. In the «Belt and Road» strategy, the Central Asia is an important point of regional economy, as opposed to a discrete region. SCO will effectively solve the shortage of regional public goods.

Conclusion. The approach and characteristic of China's participation in Central Asia Affairs are better understood from the angle of the regional governance theory and regional public goods theory. Negative externality of the regional integration process in Central Asia is the primary cause of China's policies and focus on this area. The «Belt and Road» strategy brings Central Asia into China's policy system of regional governance. It is the new stage for China's Central Asia policy. Providing regional public goods and promoting development of regional integration is the new direction for China's foreign policy in Central Asia affairs. China's policy objective is to propel the process of regional governance.

China insists on the principle of non-interference and cooperation in Central Asia affairs. However, there still are some conflicts with Russia and the United States. Regardless, the complex security situation and the regional imbalances in economic situations will bring challenges and risks to China's CentralAsia policies. So, how can wejudge China's policies on the regional integration of Central Asia? The authors suggest one evaluation criterion is whether or not China, through regional coordination and integration, has built an effective, multi-layered supply-mechanism for regional public goods or improved the real level of regional integration in Central Asia. In order to participate in regional affairs and achieve the goals of regional integration in Central Asia, China tries to expand the original regional boundary and construct a wider model for supplying regional public goods.

China's regional governance programme can effectively avoid geopolitical conflicts between Russia and the United states in Central Asia. Additionally, the plurality and openness of regional actors can effectively dispel obstacles of regional integration. Expanding the region's boundary will increase the number of actors in the region, and probably result in the problem of low efficiency in regional public goods.

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