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Fear or greed? The balance of relative interest under the dual hierarchical order in Asia-Pacific

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Fear or greed? The balance of relative interest under the dual hierarchical order in Asia-Pacific

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FEAR OR GREED?
THE BALANCE OF RELATIVE INTEREST UNDER
THE DUAL HIERARCHICAL ORDER IN ASIA-PACIFIC

by

ELLEN KIM

A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfilment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(POLITICAL SCIENCE AND INTERNATIONAL RELATIONS)

August 2021

Copyright 2021 Ellen Kim
ii

ACKNOWLEDGEMENTS

I am indebted to so many people for their help and support. First, I would like to thank
professors David Kang, Saori Katada, and Annette Kim for serving on my committee and
training me as a scholar. This dissertation would not have been possible without years of their
strong, dedicated support and guidance.
I also want to thank many individuals who read parts of my papers at various stages.
Professors Charles Glaser, Steven Miller, and Morgan Kaplan gave me insightful comments at
the Bridging Asia Conference in January 2021 that helped me to hone my ideas further.
Professors Victor Cha, Ji-young Lee, John Park, Jonathan Markowitz, and James Lo have been
great mentors to me and given me invaluable advice during the dissertation process.
Many USC colleagues also gave many helpful feedback and suggestions that helped me
improve this research. I am particularly grateful to Alex Lin, Kyuri Park, Nayoung Lee, Siu Hei
Wong, Yuji Idomoto, Gabrielle Cheung, Miriam Barnum, Pongkwan Sawasdipakdi, Paul Orner,
Han-Hui Hsieh, and Joshua Leung. I am also grateful to the Korea Foundation and USC Korean
Studies of Institute (Gloria Koo, Linda Kim, and Sarah Shear) for supporting my research and
providing institutional support.
Most importantly, I want to thank Jesus, my family, and friends for their love and prayer.
Their words of wisdom, hope, and encouragement gave me the strength to complete this journey.

iii

TABLE OF CONTENTS
Acknowledgments………………………………………………………………………………...ii
List of Tables……………………………………………………………………………………..iv
List of Figures……………………………………………………………………………………..v
Abstract……………………………………………………………………………………….…..vi

Chapter 1 - Introduction……………………………………………………………………….......1

Research Puzzle………….………………………………………………………...……...1
Theory of Balance of Relative Interest ………….………………………………………..4
The Implications…………..………………………………………………………………5

Chapter 2 - Literature Review…………………………………………………..........……………7

Chapter 3 - Theory of Balance of Relative Interest………….…………………………….…….15

The U.S.-China Dual Hierarchy in Asia-Pacific…………………………………………15
Main Theory………….…………………………………………………………………..17
Research Design……………………………….…………………………………………27
Case Selection……………………………………………………………………………28

Chapter 4 – U.S.-China Dual Hierarchy Index.……..…………………………………………...30

Index of Economic Hierarchy………….………………………………………………...31
Index of Security Hierarchy………….…..………………………………………………34
U.S.-China Dual Hierarchy in the Asia-Pacific Region…...…………………………….37

Chapter 5 – Case Study………………………………………..………………………………...41

Japan………….……………………………………………………………….…………43
Philippines………….……………………………………………………………………60
Australia………….……………………………………………………………………...75
South Korea………….…………………………………………………………………..89

Chapter 6 - Conclusion………………………………………………………………………....105

Case Study Findings………….………………………………………………………...105
The Implications………….…………………………………………………………….109
Areas for Future Research………….…………………………………………………..111

Bibliography…………………………………………………………………………………....115

Appendices……………………………………………………………………………………...134
Appendix A: Country-Level Economic and Security Hierarchy Indices………………134
Appendix B: Data Collection and Consolidation……….………………….....………..138
Appendix C: AIIB and BRI Participation Country List ……...…………………....…..142
iv

LIST OF TABLES

Tables
Table 1- Assessment of Relative Interest and Alignment Choices………………………………18
Table 2- Balance of Relative Interest by the Power Disparity and the Geographical Scope of
China’s Initiative………………………………………………………………………..27
Table 3- Top 12 Recipients of Japan’s Bilateral ODA in 2013-2017……………………………55
Table 4- Infrastructure Quality Scores of Select Countries in 2011-2017……………………….64
Table 5- U.S. Military Bases in Select Countries in 1989-2019………………………………..140
Table 6- List of AIIB Founding Members by Application Date and Region…………...……...142
Table 7- List of BRI Participating Countries by Year and Income Group……………...……...144

v

LIST OF FIGURES

Figures
Figure 1- U.S. and Chinese Economic Hierarchy Indices in 2000-2019………………………...33
Figure 2- U.S. and Chinese Security Hierarchy Indices in 2000-2019…………………………..36
Figure 3- U.S.-China Dual Hierarchy Index in 2000-2019……………………………………...38
Figure 4- Military Spending by Select Country in 2010-2019 (% of GDP)……………………..46
Figure 5- Total Inland Transport Infrastructure Investment……………………………………..50
Figure 6- Dyadic Trade Index in 2000-2019…………………………………………………...134
Figure 7- Dyadic FDI Index in 2000-2019……………………………………………………..135
Figure 8- Dyadic Arms Transfer Index in 2000-2019………………………………………….136
Figure 9- Dyadic Troop Access Index in 2000-2019…………………………………………..137

vi

ABSTRACT

How do countries make alignment choices when they are forced to choose sides between an
existing hegemon and a rising great power? This is, perhaps, the most consequential question
facing the world as the U.S.-China great power competition continues to deepen. This
dissertation argues that countries make their alignment decisions according to the relative interest
they prioritize. As China’s economic influence expands over time and across regions, many
countries perceive conflicting economic and strategic interests and, therefore, formulate their
national interest based on the rational cost-benefit calculation of their economic and strategic
interests. Accordingly, the balance of relative interest theory suggests that major powers and
secondary powers pursue different national interest and the different relative interest they
prioritize lead them to make divergent alignment choices. Specifically, this theory claims that
fear of losing their stakes in the existing order and regional influence drives the major powers to
prioritize their strategic interest and thus align with the United States to preserve the status quo.
By contrast, greed drives the secondary powers to prioritize their economic interest and align
with China for tangible economic benefits. This study fills the gap in the power transition
literature by elucidating the secondary powers’ incentives and behavior and helps explain why
we observe divergent alignment behavior among U.S. allies in the Asia-Pacific region.

1

Chapter 1: Introduction
I think it’s very desirable for us not to have to take sides,
but the circumstances may come when ASEAN may have to
choose one or the other. I am hoping that it’s not coming soon.

--Prime Minister Lee Hsien Loong
1
--

Research Puzzle
The rise of great power competition is an unsettling event in international politics.
Competition raises tension and uncertainties, and miscalculations can lead to unintended
consequences and even an armed conflict. As a result, scholars have vigorously studied the
various patterns of state behavior when there is the rise and fall of great powers. And yet, it is
still less clear how countries would respond when they are caught in a great power rivalry.
Specifically, when they are forced to choose sides between the existing hegemon and the rising
great power, how would they make their alignment choices? Moreover, what determines such
decisions? Since the onset of U.S.-China great power competition in 2018, these are very
important questions as many countries are now finding themselves in a strategic dilemma of
having to choose sides between the United States and China.
2

No region faces this dilemma more strongly than East Asia, where countries have
maintained a strategic balance, or an equidistance, between these two countries. Lee Hsien

1
Catherine Wong, “Singapore leader Lee Hsien Loong warns region may have to choose between China and US,”
South China Morning Post, November 15, 2018, https://www.scmp.com/news/china/diplomacy/article/2173479/
singapore-leader-lee-hsien-loong-warns-region-may-have-choose
2
For recent discussion on this topic, see Jonathan Stromseth, Don’t make us choose: Southeast Asia in the throes of
US-China rivalry (Washington, DC: The Brookings Institution, 2019), https://www.brookings.edu/research/dont-
make-us-choose-southeast-asia-in-the-throes-of-us-china-rivalry/ ; Bonnie Glaser, “The Choice for Southeast Asia
Isn’t between the United States and China,” June 17, 2019, The Strait Times,
https://www.straitstimes.com/opinion/the-choice-for-s-e-asia-isnt-between-the-us-and-china; Andrea Kendall-Taylor
and Rachel Rizzo, “The US or China? Europe Needs to Pick a Side,” Politico Magazine, August 12, 2019,
https://www.politico.com/magazine/story/2019/08/12/us-china-europe-relations-227614;
2

Loong, prime minister of Singapore (2004-present), recently wrote, “Southeast Asian countries,
including Singapore, are especially concerned as they live at the intersection of the interests of
various major powers and must avoid being caught in the middle or forced into invidious
choices.”
3
Even U.S. treaty allies showed reluctance to side with America outright. In November
2018, Australian prime minister Scott Morrison (2018-present) publicly stated, “Australia
doesn’t have to choose and [it] won’t choose.”
4
Similarly, Philippine President Rodrigo Duterte
(2016-present) said in May 2021 that his country “does not see the need to take sides in the
ongoing geo-economic competition among big powers.”
5

Despite these statements made by the political leaders, a subtle variation in countries’
alignment preferences also emerged over time as the U.S.-China great power competition
quickly escalated to an all-front confrontation. For instance, Japan and Australia have actively
supported the U.S.-led Huawei ban, free and open Indo-Pacific (FOIP) strategy, and Blue Dot
Network. Moreover, these two countries, along with India, recently participated in the U.S.-led
quadrilateral strategic dialogue, known as the Quad, which is seen as an informal quasi-alliance
to contain China. By contrast, other Asian countries, including some U.S. allies like South Korea
and the Philippines, have either withheld their support to these U.S.-led initiatives or are yet to
decide their stance. So, what explains this growing variation in these countries’ alignment
behavior? More importantly, why are some U.S. allies inclined to align with China while others
don’t?

3
Lee Hsien Loong, “The Endangered Asian Century,” Foreign Affairs, July/August 2020,
https://www.foreignaffairs.com/articles/asia/2020-06-04/lee-hsien-loong-endangered-asian-century
4
Quoted in Stromseth, Don’t make us choose.
5
“Duterte says Philippines won't take sides as US and China tussle,” Nikkei Asia, May 21, 2021,
https://asia.nikkei.com/Spotlight/The-Future-of-Asia/The-Future-of-Asia-2021/Duterte-says-Philippines-won-t-take-
sides-as-US-and-China-tussle
3

Whether to align with the U.S. or China is not a simple question at all in today’s
interdependent world. The following account illustrates the strategic dilemma facing many
countries. In April 2015, a private conversation between German Chancellor Angela Markel
(2005-present) and then-prime minister of Australia Tony Abbott (2013-2015) was leaked to the
public. According to the Sydney Morning Herald, Markel asked Abbott about what drove
Australia’s China policy, and Abbott succinctly described in two words: “fear and greed.”
6

Abbott’s response exemplifies Australia’s ambivalent view toward China. On the one hand,
China is Australia’s largest trading partner and key to its future prosperity. On the other hand,
China’s increasingly assertive behavior in the South China Sea makes Australia nervous and
raises security concern. As a result, Malcolm Turnbull (2015-2018), who succeeded Abbott,
stated: “We have to hedge against the risks and we have to make sure we are able to take
advantage of the opportunities…The important thing is to be clearly focused, relentlessly
focused on Australia’s national interest.”
7

This policy dualism is not a unique aspect of Australia alone. In fact, as China has
become a key trade partner and investor in many countries, its economic ascent has brought
about what John Ikenberry calls the emergence of the “dual hierarchy” in East Asia, under which
many countries have become reliant on the U.S. for security and China for economic prosperity.
8

And this dual hierarchical system has come to play a role as a key structural constraint that

6
John Garnaut, “‘Fear and greed’ drive Australia's China policy, Tony Abbott tells Angela Merkel,” The Sydney
Morning Herald, April 16, 2015, https://www.smh.com.au/politics/federal/fear-and-greed-drive-australias-china-
policy-tony-abbott-tells-angela-merkel-20150416-1mmdty.html
7
Department of the Prime Minister and Cabinet, “Malcolm Turnbull’s Press Conference at the Launch of the
Government’s Foreign Policy White Paper,” November 23, 2017,
https://pmtranscripts.pmc.gov.au/release/transcript-41345
8
G. John Ikenberry, “Between the Eagle and the Dragon: America, China, and Middle State Strategies in East
Asia,” Political Science Quarterly 131, no. 1 (2016): 9-43.
4

governs state alignment behavior, driving many countries in East Asia and beyond to perceive a
split of national interest in the face of the rising U.S.-China great power competition.

Theory of Balance of Relative Interest
This dissertation examines why countries in the Asia-Pacific region, specifically U.S.
allies, show divergent alignment behavior in response to the U.S.-China tug of war over China’s
economic initiatives. The balance of relative interest theory argues that countries make their
alignment decisions according to the relative interest they prioritize. As China’s economic
influence expands over time and across regions, many countries perceive conflicting economic
and strategic interests and thus formulate their national interest based on their rational cost-
benefit calculations.
This theory suggests that the assessment of national interest differs between the major
powers and secondary powers given their different economic conditions and political stakes in
the existing order. As China creates new economic opportunities through its various initiatives,
the major powers, which are highly satisfied with the status quo, become worried about China’s
revisionist intent and its growing influence in their regions. Accordingly, this theory predicts that
higher strategic risks perceived by the major powers drive them to align with the U.S. to defend
the existing order and check China’s growing influence in their regions. Yet, the secondary
powers have different incentives. Although they may be worried about China’s revisionist
ambitions and its growing political influence, this is usually not the primary or immediate
concern for the secondary powers given their focus on domestic economic imperatives and
limited political stakes they have in the existing order. Consequently, this theory suggests that
5

higher economic benefits perceived by the secondary powers lead them to align with China in
the expectation for tangible economic gains.
To summarize, the major powers and secondary powers pursue different national interest
when they make their alignment choices between the U.S. and China. As the Chinese economic
influence continues to expand over time and across regions, fear drives the major powers to
prioritize their strategic interest and align with the U.S. to defend the existing order. By contrast,
greed drives the secondary powers to prioritize their economic interest and align with China for
tangible economic benefits. This dissertation demonstrates this theory through the comparative
case studies of U.S. allies’ alignment decisions over the Asian Infrastructure Investment Bank
(AIIB) and Belt and Road Initiative (BRI).

The Implications
This research builds on and moves beyond Randell Schweller’s balance of interest theory
to explain how alignment behavior diverges among U.S. allies in the context of U.S.-China great
power competition. Specifically, this study pays attention to the fact that the degree of status quo
satisfaction varies among the status quo states and shows how this variation can generate
different alignment decisions, especially between the major powers and secondary powers. By
doing so, this research fills a gap in the power transition literature that largely overlooks the
secondary powers by showing how their incentives and strategies diverge from those of great
powers and major powers.
This study has important implications for U.S. policymakers. As the U.S.-China great
power competition continues to deepen, understanding what causes different alignment
preferences among U.S. allies is critical in developing an effective U.S. grand strategy in Asia-
6

Pacific. This study shows and explains how and why four U.S. allies made different alignment
choices over China’s key economic initiatives. By doing so, this research can help the U.S.
policymakers to better understand their different incentives and priorities and develop a more
effective alliance management strategy.
The dissertation is organized as follows. Chapter 2 starts with the definition of alignment
and reviews the relevant literature. Chapter 3 introduces the balance of relative interest theory
and explains the research design and case selection. Chapter 4 presents the U.S.-China dual
hierarchy index model to demonstrate the emergence of the dual hierarchy in the Asia-Pacific
region. Chapter 5 presents four empirical cases—Japan, the Philippines, Australia, and South
Korea—tracing their alignment decisions over China’s two economic initiatives, AIIB and BRI.
Finally, Chapter 6 discuss empirical findings, research implications, and future areas of research.

7

Chapter 2: Literature Review

What is Alignment?
To examine what causes a variation in state alignment behavior, it is essential to
understand what alignment is. According to Glen Snyder, alignment is “a set of mutual
expectations between two or more states that they will have each other’s support in disputes or
wars with particular other states.”
9
Strictly speaking, alignments and alliances are not identical.
Snyder calls alliances as the “formal associations of states for the use (or non-use) of military
force, in specified circumstances, against states outside their own membership.”
10
In other words,
the alliance is simply a “formalized” form of alignment through “explicit” terms of a treaty
signed between two or more states to support each other in times of a crisis or military conflict.
11

As such, Snyder calls the alliances the “subset of alignments.”
12

Other scholars agree with this distinction. For instance, George Liska writes, “alliances
merely formalize a built-in polarity.”
13
Victor Cha notes that “The expectations states have
regarding the likelihood and degree of support from others are...at the core of alliance
ties...contracts only reinforce and formalize alignment patterns that exist on the basis of
perceived common interests.”
14
Michael Ward also writes, “Alignment is not signified by formal
treaties, but is delineated by a variety of behavioural actions. It is a more extensive concept than
alliance since it does not focus solely upon the military dimension of international politics.”
15

9
Glen H. Snyder, “Alliance Theory: A Neorealist First Cut,” Journal of International Affairs 44, no.1
(Spring/Summer 1990): 105.
10
Glenn H. Snyder, Alliance Politics (Ithaca, New York: Cornell University Press, 1997), 4.
11
Ibid, 8.
12
Ibid, 8.
13
George Liska, Nations in Alliance: The Limits of Interdependence (Baltimore: Johns Hopkins Press, 1962), 16.
14
Victor D. Cha, Alignment Despite Antagonism: The United States-Korea-Japan Security Triangle (Stanford,
California: Stanford University Press, 1999), 39-40.
15
Michael D. Ward, Research Gaps in Alliance Dynamics (Denver: University of Denver, 1982), 7.
8

However, scholars generally use alignments and alliances interchangeably because of their
conceptual overlap. For instance, Stephen Walt defines balancing as “alignment against the
threatening power” and bandwagoning as “alignment with the dominant power, either to appease
it or to profit from its victory.”
16

What determines Alignment?
Existing scholarship offers various explanations about what affects state alignment
behavior. The most prominent factors oft-cited by realist scholars are power, threat, and interest.
For instance, Kenneth Waltz in his balance of power theory claims that in the state of anarchy
where security is the ultimate goal, power is the key determinant of alignment.
17
He writes,
“Secondary states, if they are free to choose, flock to the weaker side; for it is the stronger side
that threatens them. On the weaker side they are both more appreciated and safer.”
18
Stephen
Walt admits that power is a critical factor but argues that states balance or bandwagon, more
precisely, against a prevailing threat.
19
Walt suggests aggregate power, geographic proximity,
offensive power, and aggressive intentions can contribute to the state’s threat perception.
20

Randall Schweller disagrees with Waltz and Walt, arguing that whether to balance or bandwagon
is not always driven by the state’s desire “to achieve greater security.”
21
Instead, he claims that
balancing and bandwagoning behavior are not opposite concepts induced by security and that
bandwagoning, if defined more broadly, is usually driven by “the expectation of gain.”
22
Hence,

16
Stephen M. Walt, “Testing Theories of Alliance Formation: The case of Southwest Asia,” International
Organization 42, no. 2 (1988): 278.
17
Kenneth Waltz, Theory of International Politics (Massachusetts: McGraw-Hill, 1979), 126.
18
Ibid, 127.
19
Walt, “Testing Theories of Alliance Formation,” 279-281.
20
Ibid.
21
Randall L. Schweller, “Bandwagoning for Profit: Bringing the Revisionist State Back In,” International Security
19, no. 1 (Summer 1994): 74.
22
Ibid, 74 and 93.
9

he writes, “The aim of balancing is self-preservation and the protection of values already
possessed, while the goal of bandwagoning is usually self-extension: to obtain values coveted.”
23

George Liska and Glenn Snyder offer similar arguments, but they are less restrictive
about what generates alignments. For example, Liska writes, “when they are sufficiently intense,
and security is the chief concern, conflicts are the primary determinant of alignments.”
24
While
alignment is a concept connected to the balance of power dynamics, he also notes that the
determinants of alignment can vary under various circumstances and specific conditions.
25
In the
economic context, he notes that alliances are about “maximizing gains and sharing liabilities.”
26

Hence, he writes, “The decision to align, in what form, and with whom-or not to align, as part of
a deliberate policy—is made with reference to national interests.”
27
Snyder also concurs that
alignments can emerge in response to various sources, such as “perceived interests, capabilities,
and observed behavior of other states, including their alliance pledges.”
28

Other scholars offer domestic explanations.
29
For instance, Steven David argues that the
balance of power theory is often insufficient to explain the alignment behavior of the Third
World countries and that “the most powerful determinant of alignment is the drive of Third
World leaders to ensure their political and physical survival.”
30
Since internal threats are usually
the most “pressing issue” to Third World leaders, he observes that these leaders often change
their countries’ external alignment to suppress internal threats to their regimes, even at the

23
Ibid, 74.
24
Liska, Nations in Alliance, 12.
25
Ibid, 26-30.
26
Ibid, 24.
27
Ibid, 24.
28
Snyder, Alliance Politics, 6.
29
Also see Michael N. Barnett and Jack S. Levy, “Domestic Sources of Alliances and Alignments: The Case of
Egypt, 1962-73,” International Organization 45, no.3 (Summer 1991): 369-395.
30
Steven R. David, “Explaining Third World Alignment,” World Politics 43, no. 2 (January 1991): 236.
10

expense of their countries’ interests.
31
Numerous scholars also study whether similar internal
traits, such as the regime type and ideological affinity, have any effect on the choice of alliance
partners.
32
For example, using the comprehensive Correlates of War (COW) alliance dataset
from 1815 to 1992, Michael Simon and Erik Gartzke find that democracies are not more likely to
ally with one another when compared to autocracies.
33
But they also conclude that similar regime
types may impact alliance partner choice in the bipolar system.
34

Power transition literature deserves attention in the discourse of the U.S.-China great
power competition. When a rising great power challenges an existing dominant power, power
transition theorists suggest that joint status quo evaluation—the extent to which two countries are
jointly satisfied with the regional and global status quo—can create alignments between status
quo states and revisionist states.
35
For instance, if two countries are jointly satisfied with the
status quo, these status quo states will cooperate each other to defend the status quo against a
status quo challenger.
36
But if one of them becomes dissatisfied with the status quo, their dyadic
relationship becomes “competitive.”
37
If neither of them is satisfied with the status quo, these
dissatisfied states will form a “collusive partnership” to revise the status quo against status quo
defenders.
38

31
Ibid, 235-236.
32
See, for example, Randolph M. Siverson and Juliann Emmons, “Birds of a Feather: Democratic Political Systems
and Alliance Choices in the Twentieth Century,” Journal of Conflict Resolution 35, no. 2 (June 1991): 285-306. For
discussion on the role of ideology, see Stephen M. Walt, The Origins of Alliances (New York: Cornell University
Press, 1987), 181-217.
33
Michael W. Simon and Erik Gartzke, “Political System Similarity and the Choice of Allies: Do Democracies
Flock Together, or Do Opposites Attract?” Journal of Conflict Resolution 40, no.4 (December 1996): 617-635.
34
Ibid.
35
Ronald L. Tammen et al., Power Transitions: Strategies for the 21st Century (New York: Chatham House,
Publishers, 2000), 10-11.
36
Ibid.
37
Ibid.
38
Ibid.
11

Scholars have used existing theories to discuss how East Asian countries have responded
to China’s rise. While some examine evidence of China’s revisionism, others explore whether
Asian countries are balancing against or bandwagoning with China.
39
For example, Adam Liff
and John Ikenberry claim that there is a growing security dilemma between China and its
neighboring countries that drives military competition in the region, although a full-fledged arms
race is yet to be seen.
40
But, David Kang claims that most East Asian countries are
accommodating or bandwagoning with China.
41
He further asserts that many of these Asian
countries do not perceive China as threatening as is often believed and substantiates his claim
with a long-term decline in their defense spending.
42

Most recently, scholars and practitioners have begun to explore hedging as a dominant
trend not only for the U.S. and China but also for the rest of other Asian countries to navigate
great power politics.
43
Many of them contend that hedging is pervasive because of the
uncertainty associated with the ongoing power transition between the U.S. and China, as well as
their future intentions.
44
However, scholars have conceptual disagreements about hedging.
45
For
instance, Evelyn Goh defines hedging as “a set of strategies…[to] cultivate a middle position that

39
For China’s revisionism, see Alastair Iain Johnston, “Is China a Status Quo Power?” International Security 27, no.
4 (Spring, 2003): 5-56.
40
Adam P. Liff and G. John Ikenberry. “Racing toward Tragedy?: China’s Rise, Military Competition in the Asia
Pacific, and the Security Dilemma,” International Security 39, no. 2 (Fall 2014): 52-91.
41
David C. Kang, China Rising: Peace, Power, Order in East Asia (New York: Columbia University Press, 2009).
42
David C. Kang, American Grand Strategy and East Asian Security in the Twenty-First Century (New York:
Cambridge University Press, 2017).
43
See, for example, Evelyn Goh, “Meeting the China Challenge: The U.S. in Southeast Asian Regional Security
Strategies,” Policy Studies, no. 16 (2005): 1-66; Evan S. Medeiros, “Strategic Hedging and the Future of Asia-
Pacific Stability,” The Washington Quarterly 29, no.1 (2005): 145-167; Thomas J. Christensen, “Fostering Stability
or Creating a Monster? The Rise of China and U.S. Policy toward East Asia,” International Security 31, no. 1
(Summer 2006): 81-126; Van Jackson, “Power, Trust, and Network Complexity: Three Logics of Hedging in Asian
Security.” International Relations of the Asia-Pacific 14, no. 3 (2014): 331-356; Denny Roy, “Southeast Asia and
China: Balancing or Bandwagoning?” Contemporary Southeast Asia 27, no 2. (2005): 305-322.
44
Ibid.
45
For other definitions of hedging, see Darren J. Lim and Zack Cooper, “Reassessing Hedging: The Logic of
Alignment in East Asia,” Security Studies 24, no. 4 (2005): 696-727.
12

forestalls or avoids having to choose one side at the obvious expense of another.”
46
Brock
Tessman describes hedging as “less confrontational than traditional balancing, less cooperative
than bandwagoning, and more proactive than buck-passing.”
47
Kuik Cheng-Chwee calls hedging
“a strategy that works for the best and prepares for the worst.”
48
It is true that many countries are
currently exhibiting risk management behavior. However, applying hedging without a clear
conceptual agreement among scholars is problematic and makes it difficult to discern hedging
from other types of state behavior.
Meanwhile, the international political economy scholarship emphasizes the efficacy of
economic power as a policy instrument to affect state behavior and achieve foreign policy and
other geopolitical goals.
49
Successful cases of economic statecraft are often most visible in
asymmetric economic relations. From his study of Germany’s interwar trade policies toward
small eastern European states, Albert Hirschman claims that asymmetric trade relations can
foster “dependence”, “influence” or even “domination.”
50
Hirschman’s argument gained
attention in recent scholarship on China’s economic statecraft. For instance, Scott L. Kastner
notes that “[China’s] growing importance as a trading partner and a source of foreign direct
investment (FDI) for individual countries…could potentially translate into increased political
influence for the PRC..... countries becoming more dependent on China economically may also

46
Goh, “Meeting the China Challenge,” 2.
47
Brock F. Tessman, “System Structure and State Strategy: Adding Hedging to the Menu,” Security Studies 21, no.
2 (2012):193.
48
Kuik Cheng-Chwee, “The Essence of Hedging: Malaysia and Singapore’s Response to a Rising China,”
Contemporary Southeast Asia 30, no. 2 (2008): 171.
49
See, for instance, David Allen Baldwin, Economic Statecraft (Princeton, NJ: Princeton University Press, 1985);
Leslie Elliott Armijo and Saori N. Katada, “Theorizing the Financial Statecraft of Emerging Powers,” New Political
Economy 20, no. 1 (2015): 42-62; Robert Black D. Will and Jennifer M. Harris, War by Other Means:
Geoeconomics and Statecraft (Cambridge: Harvard University Press, 2016); William J. Norris, Chinese Economic
Statecraft: Commercial Actors, Grand Strategy, and State Control (Ithaca, NY: Cornell University Press, 2016).
50
Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California
Press, 1945), 13-17.
13

become more inclined to accommodate PRC interests.”
51
Yet, asymmetric trade dependence is
not the only way countries can accrue coercive power. In the era of globalization and
interconnected global economic network, Henry Farrell and Abraham L. Newman argue that
“Asymmetric network structures create the potential for ‘weaponized interdependence,’ in which
some states are able to leverage interdependent relations to coerce others.”
52

Robert Ross revisits the issue of “fungibility of economic power” to adjudicate the
disagreements between security studies and international political economy.
53
Noting that
China’s growing economic influence could adversely impact the current security order in East
Asia, he examines whether economic dependence on China can “independently” affect
secondary powers’ security alignments. He concludes that economic dependence itself is
“insufficient” to determine their security alignments.
54
He writes, “Only when the superior
economic power possess superior military power do small states realign.”
55

In short, the existing scholarship provides numerous compelling theories on state
alignment behavior. Yet, it is still unclear what really drives divergent alignment behavior we
observe in the context of U.S.-China rivalry. This suggests that understanding the nature of the
U.S.-China great power competition and delineating a clear scope condition is important and
necessary before existing theories can be applied. As a result, Chapter 3 begins with a brief
discussion on the power shift in the Asia-Pacific region and its implication on the state strategies.

51
Scott L. Kastner, “Dreams or Reality? A Preliminary Exploration of the Relationship between China’s Economic
Growing Power and Its Political Influence in Developed Countries,” in China Dreams: China's New Leadership and
Future Impacts, ed. Chih-Shian Liou and Arthur S. Ding (New Jersey: World Scientific Publishing, 2015), 61-62.
52
Henry Farrell and Abraham L. Newman, “Weaponized Interdependence: How Global Economic Networks Shape
State Coercion,” International Security 44, no.1 (summer 2019): 45.
53
Robert S. Ross, “On the fungibility of economic power: China’s economic rise and the East Asian security order,”
European Journal of International Relations 25, no. 1(2019): 302–327.
54
Ibid, 304.
55
Ibid, 319. Also see Robert Ross, “Balance of Power Politics and the Rise of China: Accommodation and
Balancing in East Asia,” Security Studies 13, no. 3 (2006): 355-395.
14

The chapter will then introduce the balance of relative interest theory and testable hypotheses
and discuss research design and case selection in detail.

15

Chapter 3: Theory of Balance of Relative Interest

The U.S.-China Dual Hierarchy in Asia-Pacific
China’s economic rise has brought about a power shift in East Asia and greater Asia-
Pacific. As John Ikenberry observes, this power shift has been manifested through the emergence
of the “dual hierarchies” comprised of a security hierarchy led by U.S. dominant military power
and an economic hierarchy led by Chinese expanding economic power.
56
Ikenberry claims that
this structural change has significant implications on the state incentives and strategies. First, for
the East Asian countries, their security dependence on the U.S. and economic dependence on
China motivates them to resist taking sides between the U.S. and China so that they can continue
to benefit from both sides.
57
Second, East Asian countries’ asymmetric dependence gives the U.S
and China each an ability to leverage “extended security system” and “trade and investment” as a
policy tool to induce desirable behavior change by these Asian countries.
58
Third, each and every
strategy a country chooses vis-a-vis others is directly influenced by the strategy they choose.
Specifically, Ikenberry writes, “The choices and decisions that the United States and China make
will depend on the other, and the incentives and choices of both states will depend on the
decisions of middle states.”
59

Under this dual hierarchical system, what happens if the U.S.-China great power
competition forces the East Asian countries to choose sides? Addressing this question requires
scholars to examine the nature of the U.S.-China great power competition and the contexts in
which the East Asian countries are forced to take sides. Indeed, numerous cases of U.S.-China

56
Ikenberry, “Between the Eagle and the Dragon,” 10.
57
Ibid, 34-35.
58
Ibid, 11 and 32.
59
Ibid, 13.
16

tug of war have emerged since around 2013.
60
And from these cases, one can find U.S. officials’
repeatedly stated concern about China’s challenge to the “rules-based order.” In May 2021, for
example, U.S. Secretary of State Antony Blinken during his media interview stated:
[China] is the one country in the world that has the military, economic, diplomatic
capacity to undermine or challenge the rules-based order that we…care so much
about and are determined to defend. But I want to be very clear about
something…Our purpose is not to contain China, to hold it back, to keep it down.
It is to uphold this rules-based order that China is posing a challenge to. Anyone
who poses a challenge to that order, we're going to stand up and…defend it.
61

Power transition literature suggests that status quo satisfaction is one of the key
conditions that determine the likelihood of a conflict between the rising great power and the
existing dominant power. As A. F. K. Organski writes, “Expanding nations, particularly those
that have recently risen in power, are most likely to have goals that involve changing the status
quo, whereas declining nations and nations near the peak of their power are most concerned to
preserve the existing order.”
62
To evaluate whether China is a revisionist state or not, Alastair
Iain Johnston suggests to look at China’s attitude toward the existing rules and the distribution of
material power.
63
Specifically, does China “proactively [seek] to change the rules in ways that
defeat the purposes of international institutions?”
64
Or, is the country trying to establish regional
hegemony or seek a redistribution of power?
65

In short, the U.S.-China great power competition began with China’s perceived challenge
to the existing order established by the U.S. and other western countries, and this perceived

60
For instance, see Victor Cha, “Leading by example: Two different responses to China’s rise,” The Lowy Institute,
November 11, 2020, https://www.lowyinstitute.org/the-interpreter/leading-example-two-different-responses-chinas-
rise
61
Antony Blinken, “Secretary of State Anthony Blinken on the Threat posed by China,” interviewed by Norah
O’Donnell, 60 Minutes, CBS News, May 2, 2021, https://www.cbsnews.com/news/antony-blinken-60-minutes-
2021-05-02/
62
A. F. K. Organski, World Politics (New York: Alfred A. Knopf, 1968), 100.
63
Johnston, “Is China a Status Quo Power?”, 11.
64
Ibid, 22.
65
Ibid, 25 and 38.
17

challenge has become prominent in the economic domains through its regional and global
economic initiatives. Many countries are attracted to these initiatives because of the economic
opportunities they offer. But these initiatives also raise strategic concerns for their implications
on the existing order. This implies that the question of whether to align with the U.S. or China is
directly linked to how countries assess these two competing interests and formulate their national
interest. Accordingly, this dissertation develops a theory of state alignment behavior in the
context of the U.S.-China tug of war over China’s economic initiatives.

Main Theory
The balance of relative interest theory rests on two key assumptions. One is the U.S.
commitment to the Asia-Pacific region. The other is China’s relative restraint of its regional
ambitions and aggressive behavior. They are two essential preconditions for the theory to hold
since any change in these conditions can directly affect East Asian countries’ strategic
calculations and their alignment behavior. In fact, Ikenberry argues that the presence of these two
conditions explains why there has been little conventional balancing and bandwagoning behavior
in East Asia and that any change in either of these conditions could eventually affect the
“evolution” of the dual hierarchy.
66

The balance of relative interest theory proposes that countries make their alignment
decisions according to the relative interest they prioritize. As China’s economic influence
expands over time and across regions through its economic initiatives, many countries perceive
conflicting economic and strategic interests. The assessment of their national interest is shaped
by the interaction of two independent variables: 1) the country’s perceived level of economic

66
Ikenberry, “Between the Eagle and the Dragon,” 12 and 35-36.
18

gains from joining China’s economic initiatives (hereinafter “economic sensitivity” or ES) and 2)
the country’s perceived level of strategic risks (hereinafter “strategic vulnerability” or SV) that
will likely arise from its participation in China’s initiatives.
67

Alignment preferences are not static. As Snyder notes, alignments “are continually
changing—strengthening, weakening or disappearing, along with changes in states’ interests,
domestic political configurations, and perceptions of other states’ behavior.”
38
Likewise, state
alignment preference can change whenever there is a shift in the level of economic sensitivity
and strategic vulnerability, as shown in Table 1 below.
Table 1: Assessment of Relative Interest and Alignment Choices

Economic Sensitivity
Strategic
Vulnerability

Low High
Low No Action Necessary (Case A) Align with China (Case B)
High Align with the U.S. (Case C) No Action Available (Case D)

China’s economic initiatives are generally attractive to many countries because they offer
new economic opportunities and future prosperity. Yet, a considerable amount of financial
contribution is also required to participate in these initiatives. So, this study defines the level of
economic sensitivity to be high when these countries anticipate a higher return on their financial
contribution or a greater economic net gain from their participation. Conversely, this study
considers the level of economic sensitivity to be low when they expect small or little net gain
from their participation.

67
The “sensitivity” and “vulnerability” terms used in this study are conceptually different from those used by Robert
O. Koehane and Joseph S. Nye in their work. See Robert O. Keohane and Joseph S. Nye, Power and
Interdependence: World Politics in Transition (Boston: Little, Brown, 1977).
19

Strategic vulnerability is concerned with two distinct but related risks. One is the
geostrategic risk concerning the status quo and redistribution of power in the region. The other is
the potential security risk with the U.S. if it opposes China’s initiatives and demands other
countries not to join. This study combines these two risks and defines the level of strategic
vulnerability to be high if 1) countries perceive China’s economic initiatives to be aimed at or in
track to alter the status quo in its favor and seek to expand its influence at the expense of others;
or 2) countries perceive that their defiance to comply with U.S. demand, if present, is likely to
have a detrimental effect on their security ties with the U.S. If neither of these conditions exists,
this study considers the level of strategic vulnerability to decrease significantly.
How exactly does this interaction of economic sensitivity and strategic vulnerability
affect countries’ decisions to align with the U.S. or China, particularly among U.S. allies? To be
clear, allies do not always agree each other. Especially, when there is no common adversary,
allies must manage their divergent or conflicting interests through a process of bargaining.
68
This
bargaining power may vary, depending on “the allies’ dependence on the alliance, their
commitment to the alliance, and their comparative interest in the object of bargaining.”
69

However, when allies find their interest wholly congruent with each other, this common interest
will make them more likely to commit to each other.
70

To better understand how the U.S. allies evaluate their relative interest between economic
sensitivity and strategic vulnerability, it is necessary to look at their joint status quo satisfaction
more closely. As the power transition literature informs, status quo states are inclined to defend

68
Snyder, Alliance Politics, 165-166. According to Snyder, if two allies disagree on their common adversary, they
have alliance security dilemma, where a risk of entrapment drives one ally to seek policy autonomy from the other
ally. For discussion on the entrapment and abandonment fear, see Snyder, Alliance Politics, 180-186.
69
Snyder, Alliance Politics, 166.
70
Ibid, 22-28.
20

the existing order against a revisionist state and its coalition. However, it is important to note that
the degree of status quo satisfaction also varies even amongst the status quo states. Organski
indicates that a dominant state is the most highly satisfied with and thus most willing to preserve
the status quo because it is “the nation that established that international order in the first
place…[and] receives the greatest share of the benefits that flow from the existence of the
international order.”
71
Similarly, Schweller writes, “states that find the status quo most agreeable
are usually the ones that created the existing order; as the principal beneficiaries of the status
quo, they more than anyone else have a vested interest in preserving it.”
72
These arguments
suggest that the U.S. allies that established the existing order or contributed to its creation are
more likely to defend the status quo because of the substantial share of the benefits they receive
from it and are thus more likely to find China’s economic initiatives with high geostrategic risks
than anyone else. In other words, if the U.S. and its allies are jointly satisfied with the status quo,
their shared strategic concern will make them more likely to support each other to defend the
status quo against China’s economic initiatives. Conversely, if these allies do not strongly share
U.S. strategic concern and find the Chinese initiatives economically more attractive, they are less
likely to support the U.S. and more likely to align with China.
The balance of relative interest theory shows that the assessment of relative interest
between economic sensitivity and strategic vulnerability varies depending on the power disparity
and the geographical scope of China’s economic initiative. Power transition theorists suggest that
the distribution of benefits from the international order differ based on the types of powers. For
instance, A.F.K. Organski and Jacek Kugler write, “The difference between [the great powers]
and the dominant nation is to be found not only in their different abilities to influence the

71
Organski, World Politics, 364
72
Schweller, “Bandwagoning for Profit,” 101.
21

behavior of others, but also in the differential benefits they receive from the international order to
which they belong.”
73
Scholars generally agree that great powers and lesser powers are different
in many aspects, such as in their material capability and the scope of interests.
74
This study
shows that major powers and secondary powers have disparate incentives. Specifically, because
the major powers and secondary powers are different in terms of economic conditions and
political stake they have in the existing order, they are expected to pursue different relative
interests. The rest of the section that follows will explain how the major powers and secondary
powers formulate their national interest based on the cost-benefit calculation of economic and
strategic interests and how this assessment of relative interest leads them to diverge in their
alignment decisions.

A. Major Powers and Secondary Powers within East Asia
Major powers are, by definition, regional dominant powers.
75
They usually possess strong
material capabilities and a broad scope of interest compared to lesser powers.
76
Because they are
generally high-income economies and possess adequate, if not abundant, economic resources, the
major powers may not always and primarily be driven by the economic imperatives as the lesser
powers might. On the other hand, as David Lemke’s multiple hierarchy model describes, these

73
A. F. K. Organski and Jacek Kugler, The War Ledger, (Chicago: University of Chicago Press, 1980) Chap. 1,
Kindle.
74
There is a line of scholarship that focuses on a different category of power—great powers, middle powers, and
small powers. For discussion on small powers, see Christine Ingebritsen et al., eds., Small States in International
Relations (Seattle: University of Washington Press, 2006); Kristen P. Williams, Steven E. Lobell, and Neal G. Jesse,
eds., Beyond Great Powers and Hegemons: Why Secondary States Support, Follow, or Challenge (Stanford,
California: Stanford University Press, 2012). On middle powers, see Woosang Kim, “Rising China, pivotal middle
power South Korea, and alliance transition theory,” International Area Studies Review 18, no. 3 (2015): 251-265.
75
Douglas Lemke, Regions of War and Peace (New York: Cambridge University Press, 2002), 50; Tammen et al.,
Power Transitions, 64-66.
76
Ibid. For instance, Robert Rothstein writes, “The Great Power tend to ally in terms of a threat to the balance of the
whole system; the Small Power in terms of a threat to its local balance.” Robert L. Rothstein, Alliances and Small
Powers (New York: Columbia University Press, 1968), 62.
22

major powers sit at the top of the regional hierarchy and derive their influence from the regional
order they established.
77
Because they are most satisfied with the status quo in their regions, they
are most willing to defend the status quo “for self-preservation and to maintain their relative
positions and prestige in the system.”
78

To sum up, the major powers in East Asia are inclined to find China’s economic
initiatives with higher geostrategic risks than economic gains (Case C in Table 1). As
Schweller’s balance of interest theory reminds, if “balancing is driven by the desire to avoid
losses,” fear of losing their political stakes in the existing order is likely to drive these major
powers to align with the U.S. to push back against China’s revisionist ambitions and its growing
influence in their regions. This strategic alignment with the U.S. should remain unchanged
whether China’s economic initiative is regional or global.
Coercion is often ineffective when used against powerful countries. However, if the
major powers are U.S. allies that depend on the U.S. for security and are in dire need of U.S.
security assistance to deal with their pressing dangers, defying U.S. demand for support against
the Chinese initiatives may increase their perceived security risks with the U.S. Consequently,
their perceived security risks, combined with already high geostrategic risks perceived, will drive
up the level of strategic vulnerability for the major power allies, thereby leading their strategic
alignment with the U.S. highly likely. This suggests that when all else being equal:
China’s “Regional” Economic Initiative
Hypothesis 1: Major power allies in East Asia, which perceive higher strategic risks
than economic gains, are more likely to align with the United States.

China’s “Global” Economic Initiative
Hypothesis 2: Major powers allies in East Asia, which perceive higher strategic risks
than economic gains, are more likely to align with the United States.

77
Lemke, Regions of War and Peace, 50; Tammen et al., Power Transitions, 64-66.
78
Schweller, “Bandwagoning for Profit,” 101.
23

Secondary powers generally refer to middle and small powers sitting right below the
major powers in a power hierarchical ladder.
79
They usually have lesser material capabilities,
narrower scope of interest, and lesser influence than the major powers. Because many secondary
powers are usually low- or middle-income economies, they are often easily driven by domestic
economic imperatives. For instance, in his study of Germany’s trade policy toward the Balkans
and Danubian states in the 1930s, Michael Handel observes that these countries “were happy to
accept the possibility of future political dependence on Germany in return for immediate
economic relief.”
80
He thus concludes that economic exigency tends to drive weaker states to
“choose to solve the immediate problem, leaving the new problems thereby created to be coped
with somehow in the future.”
81

Meanwhile, the secondary powers are generally considered to have fewer stakes in the
existing order compared to the great powers and major powers that established the global and
regional orders. This suggests that the secondary powers may not be as defensive about the
existing order as the major powers might be, even if these secondary powers may not possess
revisionist intent. Furthermore, if the Chinese initiative appears to “improve” the existing order
in their favor, the secondary powers may perceive little geostrategic risks.
In short, the secondary powers in East Asia are inclined to find the Chinese initiatives
with higher economic gains than geostrategic risks (Case B in Table 1). Thus, if “bandwagoning
[is driven] by the opportunity for gain,” the secondary powers are more likely to align with

79
Tammen et al., Power Transitions, 7 and 64-66.
80
Michael Handel, “Weak States in the International System,” in Small States in International Relations, eds.
Christine Ingebritsen et al. (Seattle: University of Washington Press, 2006), 171.
81
Ibid, 171.
24

China in the expectation of higher economic gains.
82
This economic alignment with China
should remain unchanged whether China’s economic initiative is regional or global.
When the secondary powers are U.S. allies in East Asia, whether their perceived security
risks with the U.S. will offset their strong desire to pursue economic gains may depend on the
availability or intensity of U.S. (diplomatic) pressure and their bargaining power. In fact, there
are many circumstances where secondary power allies possess considerable bargaining power
vis-à-vis more powerful allies. For instance, as Snyder notes, “the ally, even if it is dependent,
will be able to resist pressure if it knows its own resources are essential to the security of its
partner” or “if it can convince the partner that it places the greater value on whatever they are
negotiating about.
83
Furthermore, the secondary powers often have a greater ability to maneuver
between two great powers when the latter competes against each other to attract the former
closer to each side.
84
Hence, the secondary power allies may have an ability to resist U.S.
pressure, as long as they do not face imminent attacks or have other pressing issues requiring
U.S. military assistance. Furthermore, suppose U.S. pressure is nonexistent or negligible. In that
case, little security risks perceived will further lower the level of strategic vulnerability, making
the secondary power allies’ economic alignment with China highly likely. Therefore, when all
else being equal:
China’s “Regional” Economic Initiative
Hypothesis 3: Secondary power allies in East Asia, which perceive higher economic
gains than strategic risks, are more likely to align with China.

China’s “Global” Economic Initiative
Hypothesis 4: Secondary powers allies in East Asia, which perceive higher economic
gains than strategic risks, are more likely to align with China.

82
Schweller, “Bandwagoning for Profit,” 74.
83
Snyder, Alliance Politics, 170-171.
84
See Enze Han, “Under the Shadow of China-US Competition: Myanmar and Thailand’s Alignment Choices,” The
Chinese Journal of International Politics 11, no. 1 (2018): 81-104.
25

B. Major Powers and Secondary Powers outside East Asia
The geographical scope of China’s economic initiative can have a differential impact on
the way major power allies outside East Asia assess their relative interest by affecting the level
of their geostrategic risks perceived. According to Walt’s balance of threat theory, threat
perception can vary by the geographical proximity.
85
This implies that the intensity of
geostrategic risks perceived by the major powers may also shift depending on the geographical
reach of China’s economic initiatives. More specifically, if China’s regional initiative is
perceived to affect the status quo within East Asia exclusively, the major power allies located
outside East Asia may not feel as strategically vulnerable as those located within East Asia. On
the other hand, the geographical scope of China’s economic initiative may have little impact on
the level of economic gains perceived. This is because major power and secondary power allies
both within and outside East Asia can still join and benefit from China’s initiatives—whether
they are regional or global. As a result, if China’s initiative is regional, the major power allies
located outside East Asia may find their perceived geostrategic risks outweighed by their
perceived economic gains and have an incentive to align with China, provided that they face no
imminent security dangers requiring U.S. military assistance (Case B in Table 1). As a result,
when all else being equal:
China’s “Regional” Economic Initiative
Hypothesis 5: Major power allies located outside East Asia, which perceive higher
economic gains than strategic risks, are more likely to align with China.

On the other hand, if China’s global economic initiative reaches across regions, appears
to affect the status quo within their own regions, and undercut their regional influence, the major
powers located outside East Asia may become as strategically vulnerable as those located within

85
Walt, The Origins of Alliances.
26

East Asia. As a result, when China’s economic initiative is global, the major powers located
outside East Asia may find their perceived economic gains offset by their higher geostrategic
risks perceived. Any perceived security risks with the U.S. will further increase the level of
strategic vulnerability, thereby making the major power allies’ strategic alignment with the U.S.
highly likely. This suggests that when all else being equal:
China’s “Global” Economic Initiative
Hypothesis 6: Major power allies located outside East Asia, which perceive higher
strategic risks than economic gains, are more likely to align with the
United States.

In contrast to the major power allies, the geographical scope of Chinese initiatives has little
impact on the secondary power allies’ perception of geostrategic risks given their limited stakes
in the existing order. Since they can still join China’s regional and global economic initiative and
benefit from them, the secondary power allies located outside East Asia are inclined to find the
Chinese initiative with higher economic gains than geostrategic risks perceived, unless they need
imminent security assistance from the U.S. Thus, when all else being equal:
China’s “Regional” Economic Initiative
Hypothesis 7: Secondary power allies located outside East Asia, which perceive higher
economic gains than strategic risks, are more likely to align with China.

China’s “Global” Economic Initiative
Hypothesis 8: Secondary power allies located outside East Asia, which perceive higher
economic gains than strategic risks, are more likely to align with China.

To recap, the balance of relative interest theory claims that countries make their
alignment decisions according to the relative interest they prioritize based on the cost-benefit
assessment of their conflicting economic and strategic interests. Table 2 below summarizes how
the assessment of relative interest shifts, depending on the power disparity and the geographical
scope of China’s initiatives.

27

Table 2: Balance of Relative Interest
by the Power Disparity and the Geographical Scope of China’s Initiative

China’s regional initiative China’s global initiative
East Asia
Major Power ES < SV ES < SV
Secondary Power ES > SV ES > SV
Outside East Asia
Major Power ES > SV ES < SV
Secondary Power ES > SV ES > SV

ES= “Economic Sensitivity” and SV= “Strategic Vulnerability”

Research Design
This dissertation primarily employs the qualitative research method. Specifically, this
study relies on the comparative case studies of U.S. allies in the Asia-Pacific region. These case
studies are combined with process tracing to illuminate the causal pathway that a variation in the
dependent variable is directly linked to the interactive effect of two independent variables,
thereby demonstrating that state alignment decision is determined by the relative interest
prioritized by the countries based on their rational cost-benefit calculation of their two competing
economic and strategic interests.
In addition, this study constructs the quantitative dual hierarchy index model. This index
model is not intended to demonstrate the causality of the argument presented in the theory. But it
complements this study by showing that the emergence of the dual hierarchical system is a
salient regional landscape in the Asia-Pacific region. Chapter 4 will discuss the model in more
detail.
This qualitative study heavily draws on secondary sources, such as media reports,
government press releases, speeches and comments made by political leaders and government
officials, scholarly books, and journal articles. To further enhance the validity of this qualitative
28

analysis, conducting interviews with government officials in the relevant countries in the future
would be helpful.

Case Study Selection
The balance of relative interest theory is tested against China’s two economic initiatives:
the Asian Infrastructure Investment Bank (AIIB) and Belt and Road Initiative (BRI). The AIIB is
a regional financial bank launched by China in October 2014 to address the infrastructure gap
and build connectivity in the Asia-Pacific region. The BRI is China’s global development
strategy with ambitious goals to revive the ancient Silk Road.
This study examines these two economic initiatives for the following three reasons. First
and foremost, the power transition and subsequent U.S.-China contest for a hegemonic
leadership in East Asia and beyond has essentially started with China’s economic rise and its
perceived challenge to the “rule-based order.” Since this challenge to the U.S. hegemonic
leadership has been prominent in, albeit not limited to, the economic and commercial areas,
examining state alignment behavior over China’s two key economic initiatives seems
appropriate. Second, the different scale of these two initiatives allows this research to compare
diverse cross-regional responses to each initiative and discern more nuanced variation in state
alignment behavior. Finally, there are some advantages to analyze the AIIB case. Given many
countries’ reluctance to take sides between the U.S. and China outright, it is often difficult to
accurately discern their alignment preferences. However, since the AIIB case involves several
application deadlines that countries have to meet in order to become the bank's founding
members, these deadlines serve to force them to reveal their alignment preferences.
29

This study compares alignment decisions of four U.S. treaty allies in the Asia-Pacific
region: Japan, the Philippines, Australia, and South Korea. These four allies have essential
features in common. They are democracies and maritime countries. Japan and the Philippines
have ongoing maritime disputes with China in the East and South China Seas, making it possible
to test whether these disputes would have any differential impact on their alignment decisions
compared to those of Australia and South Korea. In addition, the uncertainty in the credibility of
U.S. security commitments to any one of these allies can affect the rest of others. Having these
commonalities in the sample countries is important and allows for better controlled comparative
case analysis.

30

Chapter 4: U.S.-China Dual Hierarchy Index

Chapter 4 presents the U.S.-China dual hierarchy index model. As mentioned earlier,
China’s economic rise caused a power shift in the Asia-Pacific region. The U.S.-China dual
hierarchy index model traces this power shift by estimating the changing strength of U.S. and
Chinese military and economic power over time. To be clear, this index model is not designed to
test and demonstrate the balance of relative interest theory presented in this study.
The main purpose to construct the U.S.-China dual hierarchy index model is largely
three-fold. First, the model is intended to present the U.S.-China dual hierarchical system as an
essential backdrop of the theory. Second, and more importantly, by showing growing trade
dependence on China as the dominant trend in U.S. allies examined in the empirical case studies,
the model helps to rule out trade dependence as an alternative explanation to their alignment
decisions over the AIIB and BRI. As Robert Ross points out, scholars in security studies and the
international policy economy disagree on the extent to which economic power affects secondary
powers’ security alignment preference.
86
This lack of scholarly consensus implies that there is a
need to find out whether trade dependence plays any role in state alignment behavior. Hence, the
balance of relative interest theory in this study treats trade dependence on China as a given
condition for the U.S. allies, thereby controlling its effect across these countries when examining
their divergent alignment behavior. Finally, the index model serves as a methodological
improvement in demonstrating the U.S.-China dual hierarchical system in the region. In his
study, Ikenberry primarily examines the changing patterns in East Asian countries’ relative trade
dependence on the U.S. and China to demonstrate the emergence of the U.S.-China dual

86
Ross, “On the fungibility of economic power.”
31

hierarchical system. This research takes one step further by adding other relevant economic and
security indicators to show the dual hierarchy system in a more rigorous manner.
Methodological insight is borrowed from David Lake’s work, where he uses dependence
as a theoretical construct of hierarchy and creates the composite indices of U.S. economic and
security hierarchies in 1950-2000.
87
Likewise, this study builds the composite indices of the
U.S.-China dual hierarchy in 2000-2019, involving 16 countries in the Indo-Pacific region. For
the sake of brevity, these 16 countries are denoted as “middle states” and the U.S. and China as a
“great power” in the section to follow.

A. Index of Economic Hierarchy (EH)
This study uses bilateral trade and foreign direct investment (FDI) as two economic
indicators to construct the composite indices of the U.S. and Chinese economic hierarchies. Each
economic indicator has its own index that measures the middle state’s dyadic dependence on the
U.S. and China. For example, Trade IndexUS and FDI IndexUS each measure the middle state’s
trade and FDI dependence on the U.S. Similarly, Trade IndexPRC and FDI IndexPRC each measure
the middle state’s trade and FDI dependence on China. Each of these indices is constructed as
follows:
§ Dyadic Trade Index: Trade dependence is measured as a ratio of the middle state’s annual
bilateral trade with a great power to its annual global trade. To create dyadic U.S. and
Chinese trade indices from 2000 to 2019, all the annual trade dependence values obtained
for the U.S. and China are normalized to one for their highest value across 16 countries
(Myanmar, 2015). Trade data is obtained from the UN Comtrade Database.

87
David A. Lake, Hierarchy in International Relations (Ithaca, New York: Cornell University Press, 2009). Note
that this study departs from Lake’s construct of hierarchy by loosening the theoretical differentiation he tries to
make between authority and coercion. Although it is true that a hierarchal relationship is not established based on
material factors alone, I argue that material preponderance is a necessary condition for a hegemonic contender to
establish its political authority and regulate the behavior of other subordinate countries. The concept of dual
hierarchy therefore rests on the assumption that while the U.S. and China each have their political authority in
security and economic domains, respectively, these great powers also employ coercive tactics to make middle states
acquiesce to their demands and shape the latter’s alignment choices.
32

§ Dyadic FDI Index: FDI dependence is measured as a ratio of the middle state’s annual
inward FDI (stocks) from a great power to its annual inward FDI (stocks) from the world.
The FDI dependence measures obtained for the U.S. and China between 2000 and 2019
are normalized to one for their highest value (Japan, 2002). FDI data comes from the IMF
Coordinated Direct Investment Survey (CDIS) and UN Comtrade Database. Please refer
to Appendix A for more detail on data collection and consolidation.

The U.S. and Chinese composite Economic Hierarchy Indices, EH IndexUS and EH
IndexPRC, are created by adding up their respective Trade and FDI Indices and then having these
aggregated values normalized to one for their maximum aggregated value. In this case, Myanmar
(1.809) has the highest aggregated value of Trade and FDI Indices in 2016. Normalizing by the
same maximum value is necessary to make these two composite indices comparable to each
other.
Figure 1 illustrates the U.S. and Chinese Economic Hierarchy Indices between 2000 and
2019.
88
The overall trend is clear: the U.S. economic hierarchy has been declining over time
while the Chinese economic hierarchy has been rising. Put it differently, the middle states’
economic dependence on the U.S. has significantly diminished contrary to their growing
economic dependence on China.
Individual country-level Trade and FDI Indices reveal further insights into this trend (See
Figures 6 and 7 in Appendix A). First, all the middle states surveyed in this study, except India,
show that they have become more dependent on China than on the U.S. for bilateral trade.
Dyadic FDI Index, by contrast, indicates that most of them, except Sri Lanka, Pakistan,
Myanmar, and Cambodia, are heavily reliant on the U.S. FDI than on the Chinese FDI. Second,
despite these opposite trends in trade and FDI dependence, the rise of the Chinese economic

88
Note that some of the middle states surveyed in the study—namely, India, Myanmar, Malaysia, Sri Lanka, and
Vietnam—have no data outputs in the first 10 to 15 years because their dyadic FDI data is not available in those
years. As a result, some of these countries are dropped in Figure 2.
33

hierarchy over time appears to be driven by a greater effect of trade dependence. Finally,
although growing economic dependence on China is a dominant trend, not all middle states are
economically more dependent on China than on the U.S. at the aggregate level. Take a look at
EH IndexUS and EH IndexPRC of Japan, India, Singapore, and Kazakhstan in 2019. As shown in
Figure 1 below, their composite EH IndexUS values are still greater than EH IndexPRC values. By
contrast, Australia, Pakistan, Thailand, and Cambodia show that they are economically more
dependent on China at the aggregate level.

Figure 1: U.S. and Chinese Economic Hierarchy Indices in 2000-2019

0.536
0.362
0.392
0.329
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Economic Hiearchy Index
Year
U.S. Economic Hierarchy Index in 2000-2019
South Korea Japan Australia Philippines
India Pakistan Singapore Thailand
Kazakhstan Cambodia
34

B. Index of Security Hierarchy (SH)
There are three security indicators used to construct the U.S. and Chinese composite
Security Hierarchy Indices. These security indicators are treaty alliance, arms transfer, and troop
access. Each of these indices is constructed in the following ways:
§ Dyadic Alliance Index: Alliance dependence is operationalized as a dummy variable. The
Alliance Index value is equal to 1 if the middle state has a formal alliance treaty with the
great power; 0 = if otherwise. These binary measures are normalized to one for the
highest value, which is 1 in this case.

§ Dyadic Arms Transfers Index: Arms dependence is measured as a ratio of the middle
state’s annual bilateral arms import from the great power to its annual total arms import
from the world. These measures are normalized to one for the highest value (Cambodia,
2007). Data on bilateral arms transfers comes from SIPRI Arms Transfers Database.

§ Dyadic Troop Access Index: Troop dependence is measured by the degree of military
presence or by the type of access granted to the great power to enter the middle state’s
territory to defend, support, or provide traditional and nontraditional security-related
assistance. The level of military presence or access is operationalized as an ordinal
variable as follows: 0= “No Military Presence” exists when any type of foreign military
0.308
0.152
0.238
0.271
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Economic Hiearchy Index
Year
Chinese Economic Hiearchy Index in 2000-2019
South Korea Japan Australia Philippines India
Pakistan Singapore Thailand Kazakhstan Cambodia
35

access is categorically denied; 1= “Potential or Minimal Presence” is established when
temporary access is granted for “non-combat” activities only, such as commercial access
(e.g., constructing public infrastructure like ports and other types of dual-use facilities
that can serve military functions), or regularized military diplomatic activities
89
(e.g.,
joint military exercises or humanitarian assistance and disaster relief); 2= “Limited or
Moderate Presence” is established when the great power’s military has formal permission
to enter and operate less than 20 bases—whether alone or jointly with a hosting country;
3=“Robust, Full Presence” is established when the great power acquires legal basing
rights and operate more than 20 bases (e.g., garrisons) in the middle states. These ordinal
variables are normalized to one for the highest value (South Korea and Japan in this
case). Please refer to Appendix B for more detail on data source.

The U.S. and Chinese composite Security Hierarchy Indices, SH IndexUS and SH IndexPRC, can
be obtained by adding up their three respective security indices, normalized to one for their
maximum aggregated value. Japan (2.976) has the highest aggregated value of Alliance, Arms
Transfer, and Troop Access Indices in 2019. Figure 2 shows the U.S. and Chinese composite
Security Hierarchy Indices between 2000 and 2019.
The evolution of the U.S. and Chinese security hierarchies is not as clear as their
economic hierarchies. Despite that, several observations can still be made. First, the U.S. security
hierarchy is far more robust compared to the Chinese security hierarchy. The dominant and
enduring U.S. military power is attributable to the strong security reliance on the U.S. by the
U.S. allies and key security partners like Singapore. The U.S. Security Hierarchy Index values of
U.S. allies—namely, Japan, South Korea, Australia, Philippines, and Thailand—are above 0.5
almost all times during the study period. By contrast, these allies’ Chinese Security Hierarchy
Index values do not go above 0.112 and, as a result, are barely observable in Figure 2. Second,

89
According to Kenneth Allen et al, military diplomatic activities refer to “a set of non-combat activities carried out
by a country’s armed forces to advance its national diplomatic interest.” These activities generally include joint
military exchanges, senior-level meetings between militaries of two governments, naval port calls, and
nontraditional security operations such as humanitarian assistance and disaster relief. For the definition and types of
China’s military diplomatic activities, see Kenneth Allen, Phillip C. Saunders, and John Chen, “Chinese Military
Diplomacy, 2003-2016: Trends and Implications,” China Strategic Perspective, no. 11 (Washington, D.C.: National
Defense University Press, 2017).
36

although none of the middle states surveyed has their Chinese Security Hierarchy Index higher
than 0.5, there is a tell-tale sign of Chinese security hierarchy in the offing—particularly in
Myanmar, Cambodia, Pakistan, and Sri Lanka as a result of their active arms imports from China
(See Figure 8 in Appendix A). Third, Vietnam and India seem barely reliant on neither the U.S.
nor China. India shows growing arms transfer activities with the U.S. since 2010, but they are
not significant. Finally, Dyadic Alliance and Troop Access Indices are relatively static in nature
(See Figure 9 in Appendix A). As a result, the observed fluctuation in the U.S. and Chinese
Security Hierarchy Indices is mainly attributable to the effect of annual arms transfers.

Figure 2: U.S. and Chinese Security Hierarchy Indices in 2000-2019

0.856
1.000
0.852
0.58
0.579
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Security Hiearchy Index
Year
U.S. Security Hiearchy in 2000-2019
South Korea Japan Australia Philippines
India Pakistan Singapore Sri Lanka
Vietnam Thailand Kazakhstan Myanmar
Cambodia
37

C. U.S.-China Dual Hierarchy in the Asia-Pacific Region
To summarize, the middle states’ increased trade dependence on China, combined with
some of their enduring security dependence on the U.S., are key features of the U.S.-China dual
hierarchy in the Asia-Pacific and the greater Indo-Pacific region. In this section, the Chinese
economic hierarchy and U.S. security hierarchy are placed against each other on the x and y-axis
to visualize the U.S.-China dual hierarchy more clearly.
As shown in Figure 3 below, one can observe a strong gravitational pull on the Chinese
Economic Hierarchy Index over time. Almost all middle states show a sharp increase in their
Chinese Economic Hierarchy Index values (see the red dot line for the maximum value). In
2000, only three countries, namely Japan, South Korea, and Kazakhstan, had their Chinese
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Security Hiearchy Index
Year
Chinese Security Hiearchy in 2000-2019
South Korea Japan Australia Philippines India
Pakistan Singapore Sri Lanka Vietnam Thailand
Kazakhstan Myanmar Cambodia
38

Economic Hierarchy Index values above 0.125. In 2019, almost all of them, except India and
Singapore, had their Economic Hierarchy Index values greater than 0.25.

Figure 3: U.S.-China Dual Hierarchy Index in 2000-2019

39

Australia is the most China-dependent economy among the U.S. allies. Its Economic
Hierarchy Index value increased more than fivefold from 0.095 in 2000 to 0.511 in 2019. Japan
and South Korea’s Economic Hierarchy Index values also nearly doubled during the same period
40

of time. Among the non-U.S. allies, Myanmar and Cambodia are the most China-dependent
economies, with each of their Economic Hierarchy Index value reaching 0.757 and 0.688 in
2019.
To sum up, the U.S.-China dual hierarchy index model shows that while U.S. allies and
its key security partners remain strongly reliant on the U.S. for security, trade dependence on
China have increased significantly for most of the middle states surveyed here. Yet, the U.S.
serves as the top foreign direct investor in most of these middle states. Hence, not all middle
states in the region are more dependent on China than on the U.S. when both trade and FDI are
considered.

41

Chapter 5: Case Study

This section tests the balance of relative interest theory against U.S. allies’ alignment
decisions over the Asian Infrastructure Investment Bank (AIIB) and Belt and Road Initiative
(BRI). Both the AIIB and BRI epitomize China’s economic ascent to the regional and global
stage and its willingness to offer economic leadership. Examining these two initiatives together
make it possible to conduct a cross-regional, comparative study of state alignment behavior in a
consistent manner. This case study section begins with a brief overview of AIIB and BRI,
followed by the detailed case studies of four U.S. allies in the Asia-Pacific region.

Overview of AIIB and BRI
On October 2, 2013, Chinese President Xi Jinping in his speech before the Indonesian
Parliament proposed to create the AIIB to build “greater connectivity” with ASEAN countries.
90

Many ASEAN countries welcomed China’s new initiative as it could help address the massive
infrastructure gap in Asia. According to a joint study conducted by the Asian Development Bank
(ADB) and Asian Development Bank Institute in 2009, the region needs US $8 trillion
infrastructure investment between 2010 and 2020.
91
However, China’s plan to create the AIIB
raised concerns in the U.S. about the AIIB’s possible institutional competition with the World
Bank and the ADB and the destabilizing impact it may bring onto them.
92

In effect, the

90
Wu Jiao, “President Xi gives speech to Indonesia’s Parliament,” Chinadaily, October 2, 2013,
https://www.chinadaily.com.cn/china/2013xiapec/2013-10/02/content_17007915_2.htm
91
Asian Development Bank and Asian Development Bank Institute, Infrastructure for a Seamless Asia (Tokyo,
Asian Development Bank Institute, 2009), https://www.adb.org/sites/default/files/publication/159348/adbi-
infrastructure-seamless-asia.pdf
92
Eswar S. Prasad, Gaining Currency: The Rise of the Renminbi (New York: Oxford University Press, 2017), 227.
42

disagreement and the ensuing tension between the U.S. and China over the creation of the AIIB
created a strategic dilemma for other countries to choose sides between the U.S. and China.
The BRI is China’s global infrastructure development initiative with an ambitious goal to
revive the ancient Silk Road. The initial phase of the BRI was unveiled during Xi’s state visit to
Kazakhstan in September 2013 when he called for the creation of the “Silk Road Economic Belt”
with Central Asian countries.
93
A month later, Xi proposed to build a “maritime silk road” (later
renamed as the “21
st
Century Maritime Silk Road”), expanding BRI to the building of maritime
corridor throughout Southeast Asia, Oceania, the Indian Ocean, and East Africa. In November
2014, China announced that the country will contribute US $40 billion to create the Silk Road
Fund to provide financing support to BRI projects.
94
As of March 2021, nearly 137 countries are
believed to have participated in the BRI.
95
(See Table 7 in Appendix C for the list of BRI
participating countries).

93
Chinese Ministry of Foreign Affairs, “President Xi Jinping Delivers Important Speech and Proposes to Build a
Silk Road Economic Belt with Central Asian Countries,” September 7, 2013,
https://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpfwzysiesgjtfhshzzfh_665686/t1076334.shtml
94
Chinese Ministry of Foreign Affairs, “Connectivity Spearheads Development and Partnership Enables
Cooperation,” November 8, 2014,
https://www.fmprc.gov.cn/mfa_eng/topics_665678/ytjhzzdrsrcldrfzshyjxghd/t1210466.shtml
95
Note that this study disagrees with the author’s data on South Korea’s participation in BRI. David Sacks,
“Countries in China’s Belt and Road Initiative: Who’s In And Who’s Out,” Council on Foreign Relations, March
24, 2021, https://www.cfr.org/blog/countries-chinas-belt-and-road-initiative-whos-and-whos-out
43

Japan’s Strategic Alignment with the United States
I, together with President Trump, shall…lead in the high-standard
rulemaking in trade and investment broadly in the Asia Pacific region.

--Prime Minister Shinzo Abe--
96

Introduction
Former U.S. Ambassador to Japan Mike Mansfield famously stated that the U.S.-Japan
relationship “is the most important bilateral relationship in the world, bar none.”
97
Likewise, the
United States has been the most important ally and key security provider for Japan after two
countries signed the Mutual Security Treaty in 1951. The U.S. has been received well in the
Japanese society with a high public support. According to a 2021 Pew Research Poll, 71 % of
Japanese respondents viewed the United States favorably, trailing right behind South Korea and
Italy.
98

In comparison, Japan’s bilateral relationship with China has usually been viewed through
the lens of their regional rivalry.
99
This rivalry became more pronounced after China surpassed
Japan in 2010 to become the leading economy in Asia and the second-largest economy in the
world. Furthermore, historical and territorial disputes have continued to fuel tension between the
two countries and undermined their bilateral cooperation. Despite that, China’s economic ascent

96
White House, “Remarks by President Trump and Prime Minister Abe of Japan in Joint Press Conference | Tokyo,
Japan,” November 6, 2017, https://trumpwhitehouse.archives.gov/briefings-statements/remarks-president-trump-
prime-minister-abe-japan-joint-press-conference-tokyo-japan/
97
Quoted in Peter Ennis, “Why Japan Still Matter?” The Brookings Institution, May 10, 2011,
https://www.brookings.edu/research/why-japan-still-matters/
98
Pew Research Center, “U.S. favorability sees one of its steepest recoveries in years from 2020 to 2021,” June 9,
2021, https://www.pewresearch.org/global/2021/06/10/americas-image-abroad-rebounds-with-transition-from-
trump-to-biden/pg_2021-06-10_us-image_00-02/
99
Sheila A. Smith, Intimate Rivals: Japanese Domestic Politics and a Rising China (New York: Columbia
University Press, 2015). Also see Michael J. Green, Japan’s Reluctant Realism (New York: Palgrave Macmillan,
2003), 103-105.
44

is a reality that Japan cannot simply ignore. In 2004, China, including Hong Kong, replaced the
U.S. to become Japan’s largest trade partner.
100
Five years later, Japan’s export dependence on
China, excluding Hong Kong, exceeded its export dependence on the U.S. for the first time.
101

Japan has strived to reduce its economic reliance on China through the reshoring program for
years.
102
This appears to have some limited results as Japan’s top export partner continued to
fluctuate between the U.S. and China in recent years.
103
But China has been Japan’s top import
partner since 2000, with its import dependence on China reaching 23.47% in 2019, compared to
11.27% for the U.S.
104

How will Japan make its alignment choice between the U.S. and China? If the balance of
relative interest theory is correct, Japan, as the major power in East Asia, should find China’s
economic initiatives with higher strategic risks than economic gains—regardless of the
geographical scope of China’s initiatives—and thus align with the U.S. to defend the status quo.
The following AIIB and BRI cases find strong support for Hypotheses 1 and 2.

Asian Infrastructure Investment Bank
In Japan, China’s announcement to create the AIIB in October 2013 was not well-
received from the start. From Japan’s standpoint, especially as one of the key architects and

100
Todd Zaun, “A Growing China Becomes Japan’s Top Trade Partners,” New York Times, January 27, 2005
https://www.nytimes.com/2005/01/27/business/worldbusiness/a-growing-china-becomes-japans-top-trade-
partner.html
101
Japan’s export dependence on U.S. and China in 2008 were 17.75% and 15.98%, respectively, compared with
16.41% and 18.90% in 2009. These trade figures are from the World Integrated Trade System (WITS), which can be
accessed at https://wits.worldbank.org/Default.aspx?lang=en.
102
See, for example, Naomi Tajitsu, Makiko Yamazaki, Ritsuko Shimizu, “Japan wants manufacturing back from
China, but breaking up supply chains is hard to do,” Reuters, June 8, 2020, https://www.reuters.com/article/us-
health-coronavirus-japan-production-a/japan-wants-manufacturing-back-from-china-but-breaking-up-supply-chains-
is-hard-to-do-idUSKBN23F2ZO
103
Japan’s export dependence on China and the U.S. in 2019 are 19.09% and 19.90%, respectively. Historical trends
on Japan’s export dependence on the U.S. and China can be found at WITS.
104
WITS.
45

major financial contributors to the Asian Development Bank (ADB), China’s effort to establish
the AIIB was seen as “a challenge to the status quo led by the World Bank and Asian
Development Bank.”
105
Consequently, when China invited Japan to join the AIIB in spring 2014,
there was little support within the Japanese government, especially from the Ministry of Finance
(MOF).
106
In June 2014, Mitsuhiro Furusawa, a top official from the MOF, reportedly told
Chinese officials that the Japanese government was “not convinced” about the need to create a
new financial bank in Asia.
107

Japan’s reservation toward the AIIB was arguably connected to its growing concern
about China’s assertive behavior and unilateral action to change the status quo in the East and
South China Seas.
108
Following Japan’s nationalization of the Senkaku Islands (known as the
Diaoyu Islands in China) in 2012, Chinese ships began regular patrolling activities around the
disputed island. In November 2013, China announced the Air Defense Identification Zone
(ADIZ) in the East China Sea. The evolving security environment prompted Japan’s then-Prime
Minister Shinzo Abe to call for the revitalization of the U.S.-Japan alliance as his government’s
foreign policy priority. His government also adopted a new defense strategy and procurement
plan to enhance the defense capabilities of Japan’s Self-Defense Force. Japan’s defense
expenditure also began to increase under his government from US $45.5 billion in 2013 to US

105
Tetsushi Kajimoto and Takashi Umekawa, “Japan Says Not Bound by Deadline to Join AIIB, and Not Yet
Decided,” Reuters, March 31, 2015, https://www.reuters.com/article/us-asia-aiib-japan-idUSKBN0MR11320150331
106
Saori N. Katada, “At the Cross Roads: The TPP, AIIB, and Japan’s Foreign Economic Strategy,” AsiaPacific
Issues, no 125 (Honolulu: East-West Center, 2016).
https://www.eastwestcenter.org/system/tdf/private/api125.pdf?file=1&type=node&id=35659
107
“Japan reluctant to join China-led investment bank,” Japan Times, July 5, 2014,
https://www.japantimes.co.jp/news/2014/07/05/national/politics-diplomacy/japan-reluctant-join-china-led-
investment-bank/#.XRHxAy-ZNvw
108
Prime Minister’s Office, “Policy Speech by Prime Minister Shinzo Abe to the 183rd Session of the Diet,”
February 28, 2013, https://japan.kantei.go.jp/96_abe/statement/201302/28siseuhousin_e.html
46

$46.6 billion in 2018.
109
But, as shown in Figure 4, the country’s defense spending is in line with
the unofficial ceiling of 1 percent of GDP, which Japan has maintained since 1976.

Figure 4: Military Spending by Select Country in 2010-2019 (% of GDP)

Source: SIPRI

As the two largest shareholders of the ADB, the U.S. and Japan were wary about China’s
new initiative and began to defend the ADB. In April 2014, U.S. and Japanese governments in
their joint statement expressed their support to the ADB in its ability to meet the infrastructure
demands in Asia.
110
Three months later, U.S. State Department Spokeswoman Jen Psaki in a
daily press briefing stated that “any proposal for a new international development financial
institution should clearly explain how it will complement and add value to existing

109
Stockholm International Peace Research Institute (SIPRI), Military Expenditure Database,
https://www.sipri.org/databases/milex
110
White House, “U.S.-Japan Joint Statement: The United States and Japan: Shaping the Future of the Asia-Pacific
and Beyond,” April 25, 2014, https://obamawhitehouse.archives.gov/the-press-office/2014/04/25/us-japan-joint-
statement-united-states-and-japan-shaping-future-asia-pac
1.0
1.0 1.0 1.0 1.0 1.0
0.9 0.9 0.9 0.9
2.5 2.5
2.5 2.5 2.5 2.5 2.5
2.4
2.5
2.7 2.7
2.7
2.5 2.5 2.5
2.4
2.5 2.5
2.4 2.4
0.6
0.7
0.7
0.9
0.8
0.9
0.8
0.9
0.7 0.7
1.2 1.2 1.2 1.2
1.1 1.1 1.1
1.3
0.9
1.0
1.9
1.8
1.7
1.6
1.8
2.0
2.1
2.0
1.9 1.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Japan South Korea India Indonesia Philippines Australia
% og GDP
47

institutions.”
111
She also stressed that the AIIB should “incorporate high standards of
governance, environmental and social safeguards, procurement and debt sustainability that have
been established over decades of experience by multilateral development banks.”
112
Japanese
Foreign Minister Fumio Kishida during his press conference on September 2, 2014 echoed U.S.
government stance, stating Japan’s need to consider “whether there will be added value from
creating a new international institution in addition to... the ADB.”
113
While noting that Japan’s
participation in the AIIB requires “careful consideration,” he also emphasized that “fair
governance” and borrowing countries’ “debt sustainability” need to be ensured so that the AIIB
“does not damage other creditors.”
114

While the U.S. and Japan distanced themselves from the AIIB, reports began to surface in
media that U.S. officials asked U.S. allies not to join the AIIB.
115
Australian media also reported
that Abe and Australian prime minister Tony Abbott discussed the AIIB issue when they met in
late September.
116
On October 24, 2014, 21 countries attended the AIIB launching ceremony to
become the prospective founding member of the bank. However, no U.S. allies, except the
Philippines, were present at the ceremony (See Table 6 in Appendix C for the list of AIIB
founding members by the application date). China extended the application deadline till the end
of March 2015 to enlist more countries. On November 10, 2014, Abe and Xi held their first

111
Jennifer R. Psaki, “State Department Daily Briefing,” C-SPAN, July 8, 2014, https://www.c-
span.org/video/?320337-1/state-department-briefing
112
Ibid.
113
Japanese Ministry of Foreign Affairs, “Press Conference by Japanese Foreign Minister Fumio Kishida,”
September 2, 2014, https://www.mofa.go.jp/press/kaiken/kaiken4e_000097.html
114
Ibid.
115
See, for instance, Brenda Goh, “Three Major Nations Absent as China Launches W.Bank Rival in Asia,” Reuters,
October 24, 2014, https://www.reuters.com/article/china-aiib/three-major-nations-absent-as-china-launches-w-bank-
rival-in-asia-idINKCN0ID09520141024; Jane Perlez, “China Creates a World Bank of its Own, and the U.S. Balks,”
New York Times, December 4, 2015, https://www.nytimes.com/2015/12/05/business/international/china-creates-an-
asian-bank-as-the-us-stands-aloof.html
116
Phillip Coorey and Greg Earl, “Tony Abbott held talks with Shinzo Abe before decision on China bank,” The
Australian Financial Review, November 1, 2014, https://www.afr.com/world/asia/tony-abbott-held-talks-with-
shinzo-abe-before-decision-on-china-bank-20141101-11fasc
48

summit meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.
Yet, the AIIB issue, overshadowed by other more pressing issues between two countries, was not
discussed during their brief meeting.
Five months later, on March 12, 2015, things took an unexpected turn when the United
Kingdom broke ranks with Washington and announced its decision to participate in the AIIB.
UK’s decision met an unusual condemnation from Washington as one U.S. official criticized the
U.K. for its “constant accommodation of China.”
117
The next day, Foreign Minister Fumio
Kishida quickly made clear that the Japanese government’s stance remained unchanged, citing
its lingering concern about fair governance and debt sustainability issues.
118
Yet, after U.K.’s
participation, Germany, France, and Italy quickly followed suit and announced their participation
on March 17. As the number of participating countries surged within a week, Deputy Prime
Minister and Finance Minister Taro Aso indicated Japan’s possible conditional participation. On
March 19, 2015, he said, “We have been asking to ensure debt sustainability, taking into account
its impact on environment and society...We could [consider to join] if these issues are
guaranteed. We’ll give it careful consideration from diplomatic and economic viewpoints.”
119

However, he also stressed that China had not responded to Japan’s concern.
Meanwhile, the diplomatic tension intensified between the U.S. and China. On March
17, 2015, U.S. Treasury Secretary Jack Lew called on countries to “make sure that the

117
Nicholas Watt, Paul Lewis and Tania Branigan, “US anger at Britain joining Chinese-led investment bank AIIB,”
March 12, 2015, The Guardian, https://www.theguardian.com/us-news/2015/mar/13/white-house-pointedly-asks-
uk-to-use-its-voice-as-part-of-chinese-led-bank
118
Japanese Ministry of Foreign Affairs, “Press Conference by Japanese Foreign Minister Fumio Kishida,” March
13, 2015, https://www.mofa.go.jp/press/kaiken/kaiken4e_000151.html
119
Tetsushi Kajimoto, “Japan says could join China-backed AIIB if conditions met,” Reuters, March 19, 2015,
https://ca.reuters.com/article/businessNews/idCAKBN0MG07Y20150320
49

governance [of the AIIB] is appropriate” before they commit.
120
Chinese Foreign Ministry
Spokesperson Hong Lei dismissed such concern and made clear that the AIIB will “follow the
principles of openness, inclusiveness, transparency, responsibility and fairness in designing its
governance structure and operation policy.”
121
He also reassured that the bank will “cooperate
with and complement the existing multilateral development banks such as the World Bank and
the Asian Development Bank.”
122

Although strategic considerations shaped Japan’s initial approach toward the AIIB,
Japan’s economic interest was not completely overlooked as domestic calls for Japan’s
participation increased within the country. On March 23, 2015, Keidanren Chairman Sadayuki
Sakakibara opined that the Japanese government would “[need] to act in a way that doesn't put
Japanese companies at a competitive disadvantage” in the infrastructure market in Asia.
123
But
Japanese government did not seem to view that economic benefits were high for the country.
Unlike other developing countries, Japan was not deficient in government infrastructure
spending. Between 2010 and 2016, the country had the second-largest infrastructure spending
among key OECD members, as shown in Figure 5. Although expanding infrastructure exports
was one of Abe government’s economic growth strategies, there was considerable skepticism
within the government that Japan’s AIIB membership could help boost its infrastructure exports
in Asia. On March 25, 2015, for instance, ADB President Takehiko Nakao downplayed the
business community’s concern that Japan’s opt-out from the AIIB would hurt Japanese

120
Jason Lange and Douwe Miedema, “U.S. urges allies to think hard before joining Asia development bank,”
Reuters, March 17, 2015, https://www.reuters.com/article/us-europe-asia-bank-washington-
idUSKBN0MD1WS20150317
121
Chinese Ministry of Foreign Affairs, “Foreign Ministry Spokesperson Hong Lei's Regular Press Conference,”
March 17, 2015, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1246361.shtml
122
Ibid.
123
“Ball is in Tokyo's court, business chief says,” Nikkei Asia, March 23, 2015, https://asia-nikkei-
com.libproxy2.usc.edu/Politics/Ball-is-in-Tokyo-s-court-business-chief-says
50

companies, stating that “Very few items [used in infrastructure projects] are procured from
Japanese companies.”
124
The MOJ also echoed Nakao’s view, pointing to the fact that the
infrastructure project procurement rate of Japanese companies at the ADB was merely 0.5% in
2013.
125

Figure 5: Total Inland Transport Infrastructure Investment

Source: OECD
Unit: Million euros at constant price (2005)

On March 31, 2015, a final application deadline set by China for countries to become the
prospective founding members of the AIIB, Japan decided not to participate in line with the U.S.
Foreign Minister Fumio Kishida indicated that the Japanese government would continue working
with China about the bank “without being swayed by any specific deadline.”
126
Abe remained

124
“ADB chief sees possible joint financing with China-led AIIB,” Nikkei Asia, March 26, 2015, https://asia-nikkei-
com.libproxy2.usc.edu/Business/Finance/ADB-chief-sees-possible-joint-financing-with-China-led-AIIB
125
“Japan ministry sees limited merit of participation,” Nikkei Asia, May 12, 2015,
https://asia.nikkei.com/Economy/Japan-ministry-sees-limited-merit-of-participation
126
Japanese Ministry of Foreign Affairs, “Press Conference by Foreign Minister Fumio Kishida,” March 31, 2015,
https://www.mofa.go.jp/press/kaiken/kaiken4e_000156.html#topic3
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Australia France Germany India Italy Japan Korea United
Kingdom
United
States
2010 2011 2012 2013 2014 2015 2016
51

firm on his stance, saying that “There is no need to participate hastily.”
127
At the meeting with
the ruling Liberal Democratic Party (LDP) lawmakers, he reportedly said that Japan needed to
side with the U.S. for strategic reasons.
128
“The United States now knows that Japan is
trustworthy,” he added.
129
Yet, Abe also instructed his party lawmakers to establish a task force
to assess the pros and cons of Japan’s participation, raising speculation that he did not
completely rule out the possibility of joining in the future.
130

In early April 2015, an active discussion began to take place within the LDP. While many
lawmakers endorsed the Abe government’s decision to hold out, the internal party debate also
found few opposition voices to Japan’s future participation after the government’s careful review
of the bank’s governance structure and other arrangements.
131
Meanwhile, Abe showed a strong
unity with Obama on the AIIB issue during his state visit to the U.S. At their joint press
conference on April 28, 2015, he acknowledged the immense infrastructure needs in Asia but
also emphasized that Japan’s lingering concerns must be addressed. He stated, “a fair governance
is necessary of the institution. In particular, the board to review individual projects and to
approve of this is indispensable. And that sustainability, and the environment and society and the
impact of this should be considered.”
132

127
“U.S. questions Japan about stance on China-led bank,” Japan Times, April 11, 2015,
https://www.japantimes.co.jp/news/2015/04/11/national/politics-diplomacy/u-s-questions-japan-about-stance-on-
china-led-bank/#.XRHqGC-ZNvw
128
Martin Fackler, “Japan, Sticking With U.S., Says It Won’t Join China-Led Bank,” New York Times, March 31,
2015, https://www.nytimes.com/2015/04/01/world/asia/japan-says-no-to-asian-infrastructure-investment-bank.html
129
Ibid.
130
“Chinese bank proposal finds support within Abe's party,” Nikkei Asia, April 2, 2015,
https://asia.nikkei.com/Politics/Chinese-bank-proposal-finds-support-within-Abe-s-party
131
Ibid.
132
White House, “Remarks by President Obama and Prime Minister Abe of Japan in Joint Press Conference,” April
28, 2015, https://obamawhitehouse.archives.gov/the-press-office/2015/04/28/remarks-president-obama-and-prime-
minister-abe-japan-joint-press-confere
52

While staying out of the AIIB, Abe launched a new initiative called the Partnership for
Quality Infrastructure (PQI). On May 22, 2015, he announced that under his government’s new
infrastructure initiative, Japan and the ADB would jointly contribute US $110 billion over the
next five years to promote “high-quality” infrastructure development in Asia. In a gesture to
deny that the PQI was intended to counterbalance China’s AIIB, Abe said, “I have no intention
to make this a call for ‘quality over quantity.’ Asia has voracious infrastructure demand...
Instead, we should seek ‘quality as well as quantity.’ Pursuing both ambitiously is perfectly
suited to Asia.”
133

On the same day Japan launched the PQI, 57 prospective founding members of the AIIB
reached agreement to increase the bank’s capital subscription from US $50 billion to US $100
billion. This decision to increase the capital base proposed by China as early as June 2014 made
the AIIB membership more expensive for Japan as the country had to double its capital
contribution up to US $3 billion to retain the second-largest stakeholder seat after China.
134

In early June 2015, the prospect of Japan’s participation diminished further when the
LDP task force endorsed the Abe government’s initial decision to hold out. On June 3, 2015,
Kenya Akiba, who led the task force, stated that “Our conclusion is that it was a right decision
not to become a founding member. The government should closely monitor the situation and
deal with it carefully.”
135
“We are taking the long view and will make judgment only when
issues such as governance, debt sustainability and establishment of a permanent board are

133
Japanese Ministry of Foreign Affairs, “Speech by Prime Minister Shinzo Abe at the Banquet of the 21st
International Conference on the Future of Asia,” May 22, 2015,
https://www.mofa.go.jp/ic/dapc/page1e_000042.html
134
Maiko Takahashi, “Japan Estimates Potential AIIB Membership Would Cost $3 Billion,” Bloomberg, April 13,
2015, https://www.bloomberg.com/news/articles/2015-04-14/japan-estimates-potential-aiib-membership-would-
cost-3-billion-i8gua3bi
135
“Abe's ruling party calls for cautious approach to AIIB,” Japan Times, June 4, 2015,
https://www.japantimes.co.jp/news/2015/06/04/business/abes-ruling-party-calls-cautious-approach-aiib/#.XRHjRC-
ZNvw
53

resolved,” he added.
136
On June 25, 2015, 50 countries signed the AIIB charter to become the
founding members of the bank. Japan and the U.S. chose to stay out. Their position on the AIIB
remains unchanged in 2021.

Belt and Road Initiative
In the first four years after China launched the BRI in 2013, the Abe government was
relatively silent about China’s initiative. According to Asei Ito, the BRI was not much discussed
at the Japanese Diet Committee meetings, at least not until mid-2016.
137
Part of Japan’s silence
was due to the Abe government’s preoccupation with the Trans-Pacific Partnership (TPP), a
multilateral trade agreement the Obama administration pushed as an economic pillar of the U.S.
rebalancing policy to Asia. Likewise, the BRI was not a high priority issue within the Obama
administration. Jonathan Hillman, who worked in the Office of U.S. Trade Representative in
2014-2016, said, “I honestly don't think there was a lot of high-level attention given [to
the belt and road] ... until Matt Pottinger went to the Belt and Road Forum in May 2017.”
138

Nevertheless, the Japanese government closely followed the development of the BRI.
During his press conference in June 2017, Chief Cabinet Secretary Yoshihide Suga said that the
Japanese government “ha[d] continued to monitor developments concerning the ‘One Belt, One
Road’ initiative and how it would be achieved in concrete terms from the perspective of
sustainable regional development and stability.”
139
He also explained the government’s stance,

136
Ibid.
137
According to Asei Ito, the BRI began to be discussed within the Diet in mid-2016 and became a major discussion
topic since 2017. See Figure 1 at Asei Ito, “China’s Belt and Road Initiative and Japan’s Response: from Non-
participation to Conditional Engagement,” East Asia 36, no. 2 (2019):115-128.
138
Quoted in Nectar Gan and Robert Delaney, “United States under Donald Trump is veering away from China’s
belt and road,” South China Moring Post, April 25, 2019,
https://www.scmp.com/news/china/article/3007504/united-states-under-trump-veering-away-chinas-belt-and-road
139
Prime Minister’s Office, “Press Conference by Chief Cabinet Secretary Yoshihide Suga,” June 6, 2017,
https://japan.kantei.go.jp/tyoukanpress/201706/6_a.html
54

indicating that “it is important that the various initiatives under the concept of the “One Belt,
One Road” are promoted in an open manner, inclusive of all countries, and are of a high quality
in accordance with international standards. This has been our stance from the very beginning.”
140

While maintaining a wait-and-see approach, Japan adopted several policy measures to
bolster Japan’s regional influence and reinforce the principles of international economic
governance. One was Japan’s active promotion of “quality infrastructure investment as an
international standard” through its infrastructure initiatives like the PQI launched in May
2015.
141
This effort was elevated to a new level in May 2016 when Abe announced the
“Expanded Partnership for Quality Infrastructure” with Japan’s increased financial commitment
up to US $200 billion to support high-quality infrastructure projects “across the world.”
142

Overseas Development Assistance (ODA) was another policy instrument that the
Japanese government employed to safeguard the country’s strategic interest in the Indo-Pacific
region. Traditionally, Japan’s bilateral ODA has been heavily geared toward the Asian countries,
with an focus on the economic infrastructure, such as transport, communications, and energy.
143

But after Japan revised the development charter in February 2015 and established “priority
issues” in its ODA policy—such as “quality growth” and promotion of freedom, democracy,
respect for human rights, and the rule of law—a share of Japan’s bilateral ODA for the economic
infrastructure sector sharply increased from 40.6% in 2012, 48.6 % in 2014, to 51.1% in 2016.
144

140
Ibid.
141
Japanese Ministry of Economy, Trade, and Industry, “Announcement of Partnership for Quality Infrastructure,”
May 21, 2015, https://www.meti.go.jp/english/press/2015/0521_01.html
142
Japanese Ministry of Economy, Trade, and Industry, “The ‘Expanded Partnership for Quality Infrastructure’
initiative directed toward the G7 Ise-Shima Summit Meeting announced,” May 23, 2016,
https://www.meti.go.jp/english/press/2016/0523_01.html
143
See “Sector Distribution of Bilateral ODA by Major DAC Countries” under Japan’s White Paper on
Development Cooperation, which can be accessed at https://www.mofa.go.jp/policy/oda/page_000017.html
144
On Japan’s new ODA priority issues, see Japanese Ministry of Foreign Affairs, “Cabinet Decision on the
Development Cooperation Charter,” February 10, 2015, https://www.mofa.go.jp/policy/oda/page_000138.html; For
55

As shown in Table 3 below, Japan’s ODA distribution was heavily concentrated on strategic
partners in the region, such as India. After the Free and Open Indo-Pacific (FOIP) concept
became Japan’s official diplomatic strategy in August 2016 to promote a free and open maritime
order based on the rule of law, the Abe government also advanced high-quality infrastructure
development under the FOIP strategy. As a result, Japan and India, joined by many African
countries, established the Asia-Africa Growth Corridor (AAGA) in May 2017 to promote growth
and connectivity in Asia and Africa.

Table 3: Top 12 Recipients of Japan’s Bilateral ODA in 2013-2017 (Unit: USD million)

Country 2013 2014 2015 2016 2017
Total Gross
Disbursement
1 India 1,400.11 1,450.08 1,538.26 1,800.47 2,376.10 8,565.02
2 Vietnam 1,680.41 1,883.98 1,418.88 1,583.47 1,389.60 7,956.34
3 Myanmar 5,331.76 213.92 351.13 506.82 379.07 6,782.70
4 Bangladesh 435.25 405.66 465.36 568.28 1,421.65 3,296.20
5 Indonesia 968.16 569.94 478.60 399.92 520.59 2,937.21
6 Iraq 711.90 376.01 334.77 628.93 370.00 2,421.61
7 Thailand 607.21 415.72 172.77 414.05 388.61 1,998.36
8 Afghanistan 831.03 269.67 317.20 300.83 233.69 1,952.42
9 Philippines 256.72 473.28 541.95 301.51 352.30 1,925.76
10 Sri Lanka 318.12 328.58 207.00 199.03 224.02 1,276.75
11 Mongolia 182.16 119.74 100.72 191.43 516.73 1,110.78
12 Pakistan 212.16 280.45 175.50 244.70 168.28 1,081.09

Source: Japan’s ODA White Paper

After U.S. President Donald Trump ordered to withdraw the U.S. from the TPP in
January 2017, Japan’s attitude toward the BRI began to soften four months later when Abe sent
General Secretary of the ruling LDP Toshihiro Nikai to China to attend the first Belt and Road

Japan’s ODA spending on economic infrastructure, see “Distribution of Bilateral ODA by Sector” (2012 & 2016)
under Japan’s White Paper on Development Cooperation 2013, 2016, and 2017.
56

forum on his behalf. Nikai delivered Abe’s letter to Xi and China was receptive to Japan’s
diplomatic overture to improve the strained relationship between the two countries. State
Councilor Yang Jiechi visited Japan a few weeks later to discuss ways for both countries to
cooperate on the BRI, including state visits that had not been held since 2012. In June 2017, Abe
also offered Japan’s “conditional” cooperation with China on the BRI:

The "One Belt, One Road" initiative holds the potential to connect East and West
as well as the diverse regions found in between…it is critical for infrastructure to
be open to use by all, and to be developed through procurement that is transparent
and fair. I furthermore consider it essential for projects to be economically viable
and to be financed by debt that can be repaid, and not to harm the soundness of
the debtor nation's finances. I would expect that the "One Belt, One Road"
initiative will fully incorporate such a common frame of thinking, and come into
harmony with the free and fair Trans Pacific economic zone, and contribute to the
peace and prosperity of the region and the world. Japan is ready to extend
cooperation from this perspective.
145

Amid Japan’s engagement with China’s BRI, the Trump administration became openly
critical of China’s BRI. This notable shift in U.S. attitude came five months after White House
Advisor Matt Pottinger attended the first Belt and Road forum in May 2017. In October 2017,
U.S. Secretary of State Rex Tillerson in his public speech expressed concern about the standards
and debt accumulation in recipient countries of the BRI projects and indicated the need to
“expand transparent, high-standard regional lending mechanisms, tools that will actually help
nations instead of saddle them with mounting debt.”
146
During their summit meeting on
November 6, 2017, Trump and Abe agreed to strengthen U.S.-Japan bilateral cooperation on

145
Prime Minister’s Office, “Speech by Prime Minister Shinzo Abe at the Banquet of the 23rd International
Conference on The Future of Asia, June 5, 2017,
https://japan.kantei.go.jp/97_abe/statement/201706/1222768_11579.html
146
Rex Tillerson, “Defining Our Relationship with India for the Next Century: An Address by U.S. Secretary of
State Rex Tillerson,” CSIS, October 18, 2017, https://www.csis.org/analysis/defining-our-relationship-india-next-
century-address-us-secretary-state-rex-tillerson
57

high-quality infrastructure development in the Indo-Pacific region.
147
To that end, the U.S.
Overseas Private Investment Corporation (OPIC) signed agreements with the Japan Bank for
International Cooperation (JBIC) and the Nippon Export and Investment Insurance (NEXI) to
cooperate on their joint infrastructure investment in the region. At the APEC CEO summit on
November 10, 2017, Trump also assured his government’s renewed commitment to the reforms
of U.S. development financial institutions and vowed U.S. support for high-quality infrastructure
investment in Asia to “provide strong alternatives to state-directed initiatives that come with
many strings attached.”
148

The following day, Xi and Abe met on the sidelines of the APEC summit. The two
leaders reaffirmed their commitment to reset the Sino-Japan bilateral relationship and discussed
ways to enhance bilateral cooperation between their countries. Xi also requested Japan’s
participation in the BRI “for implementation at an early date.”
149
Abe in his address at the Japan-
China CEO summit on December 4 2017 underscored the importance of infrastructure
cooperation between Japan and China for its implication on the economic growth for both
countries and also for the regional prosperity.
150
But he also emphasized his principle-based
approach, insisting Japan’s cooperation with China’s BRI projects based on the principles of
openness, transparency, and fairness, and fiscal soundness.
151
Keidanren Chairman Sadayuki

147
White House, “President Donald J. Trump’s Summit Meeting with Prime Minister Shinzo Abe of Japan,”
November 6, 2017, https://trumpwhitehouse.archives.gov/briefings-statements/president-donald-j-trumps-summit-
meeting-prime-minister-shinzo-abe-japan/
148
White House, “Remarks by President Trump at APEC CEO Summit,” November 10, 2017,
https://vn.usembassy.gov/20171110-remarks-president-trump-apec-ceo-summit/
149
Chinese Ministry of Foreign Affairs, “Xi Jinping Meets with Prime Minister Shinzo Abe of Japan,” November
11, 2017, https://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpcxdeswjapcebdynlwjxgsfw/t1510293.shtml
150
Prime Minister’s Office, “Welcome Reception for the Third Japan-China Business Leader and Former High-
Level Government Official Dialogue (Japan-China CEO Summit),” December 4, 2017,
https://japan.kantei.go.jp/98_abe/actions/201712/4article4.html
151
Ibid.
58

Sakakibara welcomed Abe government’s approach, saying that “For Japan, these are the
fundamental guiding principles in dealing with One Belt, One Road.”
152

During Chinese Premier Li Keqiang’s state visit to Japan in May 2018, Japan and China
signed the agreement for business cooperation in third countries, including the establishment of
the public-private sector committee.
153
When Abe made a reciprocal state visit to China five
months later on October 25-27, the two governments held the first bilateral forum on third-party
market cooperation. 52 agreements were concluded between private companies and public
organizations from both sides to promote bilateral cooperation in infrastructure, logistics,
finance, health, and IT.
154

However, as Maaike Okano-Heijmans and Tomoki Kamo put, Japan “engaged with
China’s BRI without endorsing it in full” as the country declined to participate in the BRI.
155

While selectively engaging China’s BRI in third countries, Japan continued to work closely with
the U.S. and Australia on the BRI issues. Four months after forging the trilateral infrastructure
partnership in July 2018, lending agencies of the U.S., Japan, and Australia signed the
memorandum of understanding to implement their infrastructure partnership in the Indo-Pacific
region. In 2019, three countries also launched the Blue Dot Network to “encourage adoption of

152
Keidanren, “Executives’ Comments Press Conferences: Chairman Sakakibara's Statements and Comments at His
Press Conference,” December 18, 2017, http://www.keidanren.or.jp/en/speech/kaiken/2017/1218.html#p5
153
Japanese Ministry of Economy, Trade, and Industry, “Japan and China Conclude Memorandum on Business
Cooperation in Third Countries,” May 10, 2018, https://www.meti.go.jp/english/press/2018/0510_003.html; “China
premier Li Keqiang urges Japan to join "Silk Road" infrastructure project,” Kyodo News, May 10, 2018,
https://english.kyodonews.net/news/2018/05/0fecd65df6d8-china-premier-urges-japan-to-join-silk-road-
infrastructure-project.html
154
Japanese Ministry of Economy, Trade, and Industry, “52 MOCs Signed in Line with Convening of First Japan-
China Forum on Third Country Business Cooperation,” October 26, 2018,
https://www.meti.go.jp/english/press/2018/1026_003.html
155
Maaike Okano-Heijmans and Tomoki Kamo, “Engaging but not endorsing China’s Belt and Road Initiative,”
Clingendael, May 2019, https://www.clingendael.org/sites/default/files/2019-
05/PB_China_Belt_and_Road_Initiative_May_2019.pdf
59

trusted standards for quality, global infrastructure development in an open and inclusive
framework.”
156

156
U.S. Department of State, “Blue Dot Network: Frequently Asked Questions,” https://www.state.gov/blue-dot-
network-frequently-asked-questions/
60

Philippine’s Economic Alignment with China
Build us a railway just like the one you built in Africa
and let’s set aside disagreements for a while.

--President Rodrigo Duterte--
157

Introduction
The Republic of the Philippines is the oldest U.S. treaty ally in Asia. Before the
conclusion of their Mutual Defense Treaty on August 30, 1951, the U.S. annexed the Philippines
in 1898 and maintained a colonial rule since then. Even after the Philippines achieved its
independence from the U.S. in 1946, the U.S. continued to maintain a strong military presence
and provided external defense to the country during the Cold War. After the war ended, the U.S.
military presence in the Philippines amid the rise of anti-colonial nationalism in the 1980s
became perceived as an impingement on Philippine national sovereignty.
158
The U.S.-Philippine
alliance experienced a major setback in 1991 when the Philippine Senate did not ratify the
renewal of the basing agreement. This event resulted in the U.S. military withdrawal from the
Philippines in 1992. Yet, bilateral military cooperation has continued between the two countries
under the Visiting Forces Agreement.
China-Philippine bilateral relations blossomed during the presidency of Gloria Arroyo
(2001-2010). After China and the ASEAN signed a Declaration on the Conduct of Parties in the
South China Sea (DOC) in 2002 to resolve their maritime disputes peacefully, China and the

157
Germelina Lacorte, “Duterte tells China: Build us a railway and let’s set aside differences for a while,”
Inquire.net, February 29, 2016, https://globalnation.inquirer.net/137093/duterte-tells-china-build-us-a-railway-and-
lets-set-aside-differences-for-a-while#ixzz6a8UbX2ni
158
Sheena Chestnut Greitens, “The U.S. Alliance with the Philippines: Opportunities and Challenges,” in Strategic
Asia 2014-2015: U.S. Alliances and Partnerships at the Center of Global Power, eds. Ashley J. Tellis, Abraham M.
Denmark, and Greg Chaffin (Washington, DC: National Bureau of Asian Research, 2014), 119-145.
61

Philippines entered a “golden age of partnership” based on their strong economic cooperation.
159

Historically, the U.S. and Japan are Philippines’ primary economic partners. While this may still
be the case, with the U.S. and Japan accounting for 16.32% and 15.05% of the Philippines’ total
exports in 2019, China’s economic place in the Philippines has remarkedly been growing.
160

Specifically, Philippines’ export and import dependence on China has jumped from 1.60% and
2.20% in 1996 to 13.84% and 22.82% in 2019, respectively.
161
By contrast, the Philippines’
export and import dependence on the U.S. has significantly dropped from 34.26% and 19.51% in
1996 to 16.32% and 7.30% in 2019, respectively.
162

If push comes to shoves, how will the Philippines choose sides between the U.S. and
China? According to the balance of relative interest theory, the prevailing economic imperative
and limited stakes in the existing order should motivate the secondary powers to prioritize their
economic interest over their strategic one and thus align with China in the expectation of higher
economic gains. A closer examination of the Philippines’ response to the AIIB and BRI finds
strong support for Hypotheses 3 and 4.

Asian Infrastructure Investment Bank
After China announced the Nine-Dash Line in the South China Sea (also known as the
West Philippine Sea) in May 2009, the China-Philippines bilateral relations quickly deteriorated.
The Philippines, joined by other claimants in the dispute, protested China’s declaration of the

159
Chinese Embassy in the Republic of the Philippines, “Joint Statement of the People's Republic of China and the
Republic of the Philippines,” April 28, 2005, http://ph.china-embassy.org/eng/zfgx/zzgx/t199778.htm
160
China and Hong Kong each account for 13.84% and 13.57% of Philippines’ total exports in 2019. Trade statistics
comes from the World Trade Integrated Solutions (WITS). It can be accessed at
https://wits.worldbank.org/Default.aspx?lang=en
161
Ibid.
162
Ibid. Philippines’ export and import dependence on Japan also dropped from 17.87% and 21.84% in 1996 to
15.05% and 9.57% in 2019, respectively.
62

Nine-Dash Line. In January 2010, U.S. Secretary of State Hillary Clinton made clear that the
U.S. would take no position on the South China Sea dispute. But she also indicated that the U.S.
“has a national interest in freedom of navigation, open access to Asia’s maritime commons, and
respect for international law in the South China Sea” and urged all the claimants to resolve their
dispute by peaceful means.
163
In April 2012, tensions escalated again when China and the
Philippines clashed over the Scarborough Shoal. After months of a military standoff between the
two countries, China seized the control of the Shoal. In January 2013, the Aquino government
filed an arbitration case against China at the Permanent Court of Arbitration in Hague, but China
declined to participate.
Philippine President Benigno Aquino III (2010-2016) responded to China’s maritime
claim with several measures. First, his government announced to enhance and upgrade the
Philippines’ naval and air force capabilities to establish a “minimum credible defense posture”
against foreign intrusion and encroachment in its territory.
164
To that end, Aquino signed the
revised Armed Forces of the Philippines (AFP) modernization program in 2012 to increase the
country’s military expenditure and reorient the AFP program’s focus from internal security to
external territorial defense. Second, the Aquino government reinvigorated the U.S.-Philippine
alliance. The Philippines’ strategic pivot toward the U.S. gained momentum in the wake of U.S.
rebalancing toward Asia announced in November 2011, and diplomatic engagements between
the two countries quickly increased as a result. Between 2011 and 2014, the U.S. and Philippine
governments held four Bilateral Strategic Dialogues to discuss various bilateral and regional

163
U.S. Department of State, “Secretary of State Hillary Rodham Clinton’s Remarks at Press Availability,” July 23,
2010, https://2009-2017.state.gov/secretary/20092013clinton/rm/2010/07/145095.htm
164
Renato De Castro, “Developing a Credible Defense Posture for the Philippines: From the Aquino to the Duterte
Administrations,” Asian Politics and Policy 9, no. 4 (2017): 541-563.
63

issues.
165
In addition, the two countries had the first 2+2 foreign and defense ministerial dialogue
in April 2012.
At the pinnacle of the U.S.-Philippine “alliance update” was the conclusion of the
Enhanced Defense Cooperation Agreement (EDCA) in April 2014. Granting the rotational U.S.
troop presence and access of U.S. military hardware to military bases in the Philippines for the
next ten years, this new defense agreement marked a new milestone in the U.S.-Philippine
alliance since the U.S. handover of Subic Bay and Clair Air Base in 1992. During his visit to the
Philippines in April 2014, Obama made clear that the EDCA was not to reestablish U.S.
permanent presence in the country. He also stressed that the EDCA was not targeted at China:
“Our goal is not to counter China. Our goal is not to contain China. Our goal is to make sure
international rules and norms are respected, and that includes in the area of international
disputes.”
166

Against this backdrop, the Philippines—amid its strained ties with China and a new level
of expanding cooperation with the U.S.—signed up to China’s AIIB. On October 24, 2014, the
Philippines attended the AIIB launching ceremony and joined 21 other countries to become a
prospective founding member of the bank.
167
Although the U.S. persuaded its allies not to join
the bank, there is little evidence that similar efforts were made toward the Philippine
government.
The Philippines’ early application for the AIIB membership was driven by its economic
development imperative. The lack of an adequate and resilient infrastructure system had been a

165
Philippine Department of Foreign Affairs, “Philippine-United States Bilateral Relations Fact Sheet,”
https://dfa.gov.ph/dfa-news/dfa-releasesupdate/2695-philippine-united-states-bilateral-relations-fact-sheet
166
Emily Rauhala, “Obama in the Philippines: 'Our Goal Is Not to Contain China',” Time, April 28, 2014,
https://time.com/78779/obama-philippines-china/
167
These countries were Mongolia, Bangladesh, India, Nepal, Pakistan, Sri Lanka, Brunei, Cambodia, Laos,
Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, Kuwait, Oman, Qatar, Kazakhstan, Uzbekistan,
and Indonesia. Indonesia was absent in the signing ceremony but signed the MOU in November 2014.
64

major barrier to the Philippines’ economic growth and a source of congestion in Metro Manila.
Following the Asian Financial crisis, the country’s public infrastructure investment in 1998-2005
fell by 1.2% of GDP compared to the pre-crisis period in 1990-1997.
168
The consequence of
continuous underinvestment in public infrastructure had a negative impact on the infrastructure
quality of the country. According to the Global Competitiveness annual report published by the
World Economic Forum, the Philippines had one of the lowest infrastructure quality scores in
Southeast Asia between 2011 and 2017, as shown in Table 4 below.
169

Table 4: Infrastructure Quality Scores of Select Countries in 2011-2017

2011 2012 2013 2014 2015 2016 2017
G7 Countries Average 5.7 5.7 5.7 5.7 5.5 5.5 5.5
Northeast Asia
China 4.2 4.3 4.3 4.4 4.5 4.5 4.5
Japan 6 5.9 6 6.2 6.2 6.2 6.2
South Korea 5.9 5.8 5.6 5.5 5.6 5.6 5.7
Southeast Asia
Philippines 3.4 3.6 3.7 3.7 3.3 3 3
Singapore 6.6 6.5 6.4 6.3 6.4 6.4 6.4
Malaysia 5.7 5.4 5.5 5.6 5.6 5.5 5.3
Indonesia 3.9 3.7 4 4.2 3.8 3.8 4.1
Thailand 4.7 4.9 4.5 4.1 4 4 4.1
Vietnam 3.1 3.2 3.4 3.3 3.5 3.6 3.6
South Asia
India 3.8 3.8 3.9 3.7 4 4.5 4.6
Pakistan 3.5 3.4 3.3 3.3 3.5 3.5 3.8
The Pacific
Australia 5.2 5.2 5.2 5.1 4.9 4.8 4.7
New Zealand 4.7 4.9 5.1 5.1 5 4.8 4.8

Source: The Global Competitiveness Reports in 2011-2017

168
See footnote #35 in Asian Development Bank, Meeting Asia’s Infrastructure Needs (Manila: Asian Development
Bank, 2017), 30. The report can be found at https://www.adb.org/sites/default/files/publication/227496/special-
report-infrastructure.pdf
169
Table 4 shows the cross-country comparison of the overall infrastructure quality, measured on a scale of 1-7.
These infrastructure quality scores placed the Philippines at global rankings ranging between 95th (highest) and
113th (lowest) during the period of 2011-2017. These infrastructure quality scores are drawn from the Global
Competitiveness Reports from 2011 to 2017. Klaus Schweb, The Global Competitiveness Report 2017-2018.
(Geneva: World Economic Forum, 2017).
65

When Aquino assumed office in 2010, the government infrastructure budget was merely
1.8% of GDP.
170
This was far short of the annual infrastructure investment of US $11.56 billion
(or 6.1% of the Philippines’ annual GDP) recommended to the Philippines by the Asian
Development Bank.
171
Given the Philippines’ massive need of infrastructure investment, Aquino
set infrastructure development as one of his key economic agenda from the start of his
presidency. He aggressively pushed the Public-Private Partnership (PPP) to encourage private
sector participation in financing national infrastructure projects. In September 2013, his
government decided to increase the infrastructure budget up to 5% of GDP.
Despite its early sign-up to the AIIB, the Philippine government was reluctant to commit
to the bank. Finance Secretary Cesar Purisima in his interview with the Nikkei Asia in December
2014 said, “We will have to make sure that [the bank] will not be used for [China’s political]
purpose.”
172
He also emphasized that the bank should be “inclusive,” “focused on the
[infrastructure] needs of the region,” and complement the existing institutions.
173
Philippine
officials attended the first two Chief Negotiators’ meetings held in November 2014 and January
2015 to discuss the bank’s governance and other arrangements.
174
But the Aquino government
was non-committal even after these exploratory meetings. Purisima characterized the AIIB as
“financial and economic in nature” and downplayed concern that the Philippines’ ongoing

170
Benigno S. Aquino III, “Speech of President Aquino at the Philippine Investment Forum in Tokyo,” Official
Gazette, June 4, 2015, https://www.officialgazette.gov.ph/2015/06/04/speech-president-aquino-philippine-
investment-forum-tokyo/
171
Philippine Department of Finance, “Philippines Joins Asian Infrastructure Investment Bank,” December 30,
2015, https://www.dof.gov.ph/index.php/philippines-joins-asian-infrastructure-investment-bank/ ; Minoru Satake,
“Japan to loan nearly $2bn for Philippine rail project,” Nikkei Asia, July 28, 2015,
https://asia.nikkei.com/Economy/Japan-to-loan-nearly-2bn-for-Philippine-rail-project
172
Cliff Venzon, “Manila gives Beijing's bank project benefit of the doubt,” Nikkei Asia, December 18, 2014,
https://asia.nikkei.com/Economy/Manila-gives-Beijing-s-bank-project-benefit-of-the-doubt
173
Ibid.
174
To see a list of countries that attended these meetings, visit the AIIB website, https://www.aiib.org/en/news-
events/news/2015/The-1st-Chief-Negotiators-Meeting-was-held-in-Kunming-on-November-28-2014.html
66

maritime dispute with China would affect its government decision.
175
When the number of
prospective founding members increased up to 57 countries at the end of March 2015, Purisima
still denied the Philippines’ participation, citing that the agreement signed in October 2014 was
“non-binding until June when [the country will have] to make a commitment.”
176

Nevertheless, the Philippines’ participation remained unclear even in June 2015. During
his state visit to Japan, Aquino in his interview with the Nikkei Asia on June 3, 2015 explained
his government stance:
We have until December to understand exactly what the AIIB is and to examine
whether it is beneficial to our country. We have to check on the governance issue,
how we will actually manage this bank, who has a say as to what the policies are.
Because we don’t want to enter [into] something that appears to be beneficial but
that will have very serious repercussions for us, in case the governance is not
based on financial and economic conditions.
177

At the public event, Aquino went further and discussed his government’s previous experience
with the Chinese infrastructure loan repayment recalled in the wake of the Scarborough Shoal
standoff between two countries. He noted that China’s loan repayment demand came “very, very
early” and “potentially could have led [his country] to a cross-default.”
178
Given the ongoing
dispute with China in the South China Sea, Aquino indicated that his government will look at the
bank’s governance structure “so that the economic help that is supposed to be afforded will not
be subjected to vagaries of politics between our countries and the lead proponent.”
179

175
Chris Schnabel, “Firms urge govt to maintain PPP momentum as 2016 looms,” Rappler, March 25, 2015,
https://r3.rappler.com/business/industries/208-infrastructure/87876-maintain-ppp-momentum-firms-urge-govt
176
Butch Fernandez, “PHL ‘in no rush’ to join China-led Asian infrastructure investment bank,” The
BusinessMirror, March 31, 2015, https://businessmirror.com.ph/2015/03/31/phl-in-no-rush-to-join-china-led-asian-
infrastructure-investment-bank/
177
Mariko Tai, “Without stability, there is no prosperity, says Philippine President,” Nikkei Asia, June 3, 2015,
https://asia.nikkei.com/Politics/Aquino
178
Willard Cheng, “Philippines still studying whether to join China-led AIIB,” ABS-CBN News, June 3, 2015,
https://news.abs-cbn.com/business/06/03/15/philippines-still-studying-whether-join-china-led-aiib
179
“Aquino: PH still mulling AIIB invitation,” Rappler, June 3, 2015,
https://amp.rappler.com/business/industries/208-infrastructure/95182-aquino-aiib-china-ph
67

The Aquino government continued to be cautious while pushing for the arbitration case
against China on the South China Sea dispute. When 50 countries signed the AIIB Charter on
June 29, 2015 to become the founding member of the bank, Aquino deferred signing it. His
position changed little in October. At the Foreign Correspondents Association of the Philippines
(FOCAP) Annual Presidential Forum held on October 27, 2015, Aquino said: “We recognize
that there are advantages to joining the AIIB. At the same time… we have a negative experience
of several nature. The main question is: [does] joining benefits us or [does it] leads us into a
situation of having a repeat of that situation, which we would want to avoid?”
180

The Philippines hosted the APEC summit on November 18-19, 2015. Aquino and
Philippine Foreign Affairs Secretary Albert F. del Rosario welcomed Xi’s visit to the country,
and the South China sea issue was suppressed during the summit. However, Aquino and Xi did
not hold a bilateral meeting to discuss the ongoing disputes between the two countries.
Meanwhile, Aquino and Obama demonstrated solidarity between their countries. Before the
summit, Obama announced the handover of two ships to the Philippines. Obama also reaffirmed
U.S. “unwavering” alliance commitment to the Philippines and expressed U.S. support to the
Philippines’ diplomatic approach to resolve the maritime dispute with China. In addition, the two
leaders reaffirmed their commitment to freedom of navigation in the region and discussed ways
to enhance their maritime security cooperation.
After six months of a wait-and-see approach, the Philippines became the last country to
join as a founding member of the AIIB. The final decision was announced on December 29,
2015, two days before the final deadline, after Aquino “approved” the Department of Finance’s

180
Benigno S. Aquino III, “President Aquino at the 2015 FOCAP,” Official Gazette, October 27, 2015,
https://www.officialgazette.gov.ph/2015/10/27/2015-focap-presidential-forum/.
68

recommendation to join.
181
In his announcement, Finance Secretary Cesar Purisima indicated
that “the bank’s organization design and oversight mechanisms are committed to transparency,
independence, openness and accountability.”
182
He also noted that the Philippines “stands to
gain” from its participation in the AIIB, citing the possible “market expansion for infrastructure-
related industries and widening job and business growth opportunities,” including an expected
return of US $220 billion in real income as a result of reduced trade costs from closing the
country’s infrastructure gap.
183

China welcomed the Philippines’ participation. When asked about whether the South
China Sea dispute would affect the AIIB’s decision to fund infrastructure projects in the
Philippines, Chinese Foreign Ministry Spokesperson Lu Kang flatly denied it, calling that “a far-
fetched link between these two totally different things.”
184

Belt and Road Initiative
The Philippine foreign policy took a drastic turn under President Rodrigo Duterte. Soon
after he took office in June 2016, the U.S.-Philippines relations quickly deteriorated over
Duterte’s aggressive anti-drug campaigns at home. The U.S. expressed concern about
extrajudicial killings and human rights abuses infuriated Duterte, who openly questioned the
credibility of the U.S. security commitment to the Philippines. A set of negative events followed
and culminated in the White House decision on September 6, 2016 to cancel the planned meeting

181
Karen Lema, “Philippines to join China-backed AIIB infrastructure bank,” Reuters, December 29, 2015,
https://www.reuters.com/article/us-asia-aiib-philippines/philippines-to-join-china-backed-aiib-infrastructure-bank-
idUSKBN0UD0AT20151230
182
Philippine Department of Finance, “Philippines Joins Asian Infrastructure Investment Bank.”
183
Ibid.
184
Chinese Ministry of Foreign Affairs, “Foreign Ministry Spokesperson Lu Kang's Regular Press Conference on
December 30, 2015,” December 30, 2015,
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1328793.shtml
69

between Obama and Duterte. Four days later, Duterte announced that “the Philippines will
pursue an independent foreign policy.”
185

Duterte’s announcement of the Philippines’ “independent” foreign policy soon had a
chilling effect on the bilateral ties between the U.S. and the Philippines. On October 7, 2016,
Philippine Defense Secretary Delfin Lorenzana announced the Philippine government’s decision
to suspend joint patrols and naval exercises in the South China Sea.
186
Lorenzana also indicated
Duterte’s plan to demand the withdrawal of U.S. special forces in Mindanao and stop 28 joint
annual military exercises.
187
Four days later, Foreign Affairs Secretary Perfecto Yasay Jr. wrote
in his Facebook post that Duterte was “compelled…to realign… [the country’s] foreign policy
toward an independent track” because “American has failed” in providing the security assurance
to the Philippines.
188

After declaring the Philippines’ independent policy away from the U.S., Duterte sought
to repair the Philippines’ fraught relationship with China. Duterte’s pivot toward China was
strongly driven by the desire to enhance the Philippines’ economic cooperation with the country.
When he was a mayor of Davao City, Duterte advocated the Philippines’ engagement with
China: “We have to talk and what I need from China is not anger. What I need from China is
help to develop my country.”
189
Furthermore, his government’s primary national security

185
“Duterte: PH to have independent foreign policy,” ABS-CBN News, September 10, 2016, https://news.abs-
cbn.com/news/09/09/16/duterte-ph-to-have-independent-foreign-policy
186
“Philippines to suspend joint exercises and patrols with US military” The Guardian, October 7, 2016,
https://www.theguardian.com/world/2016/oct/07/philippines-suspend-joint-exercises-duterte-anti-us-rhetoric
187
Rebecca Kheel, “Philippines ends South China Sea patrols with US,” The Hill, October 7, 2016,
https://thehill.com/policy/defense/299784-philippines-ends-south-china-sea-patrols-with-us
188
Perfecto R. Yasay Jr, “Statement of Secretary Perfecto R. Yasay Jr.: America has failed us,” Philippine
Department of Foreign Affairs, https://dfa.gov.ph/newsroom/phl-embassies-and-consulates-news/10586-statement-
of-secretary-perfecto-r-yasay-jr
189
Richard Javad Heydarian, “Duterte still waiting for China’s ballyhooed bonanza,” Asia Times, September 30,
2019, https://asiatimes.com/2019/09/duterte-still-waiting-for-chinas-ballyhooed-bonanza/
70

concern was domestic insurgency groups.
190
Duterte flatly rejected a military approach toward
the maritime dispute in the South China Sea, stating that “[war] is not an option.”
191

Although the Permanent Court of Arbitration in The Hague ruled on July 12, 2016
that China’s claim of historical rights in the South China Sea had no legal basis, Duterte set
aside the verdict and pursued rapprochement with China. China welcomed Duterte’s diplomatic
overture. On October 20, 2016, Duterte and Xi agreed to reset their countries’ bilateral
relationship while deciding to settle the maritime dispute through peaceful negotiations. The two
countries also concluded 13 cooperation agreements, including the establishment of the joint
coast guard committee on maritime cooperation.
192
China pledged economic assistance worth
$24 billion in investment, loan, and credit and “financing support” to help the infrastructure
development in the Philippines.
193

Following his meeting with Xi, Duterte gave a speech at the business forum and declared
the Philippines’ “separation from the U.S.”
194
His sudden announcement immediately prompted
the U.S. State Department to respond that it will seek an “explanation” from the Philippine
government. On the Philippine side, government officials quickly downplayed Duterte’s
comments. “The statement the President made maintains the relationship with the West,” Trade

190
Kang, American Grand Strategy, 100 and 107-108.
191
Christina Mendez, “Duterte Ready to Face China on Territorial Issue,” Philistar, August 18, 2016,
https://www.philstar.com/headlines/2016/08/18/1614692/duterte-ready-face-china-territorial-issue
192
Pia R Ranada, “PH, China sign coast guard cooperation pact, 12 other deals,” Rappler, October 20, 2016,
https://www.rappler.com/nation/ph-china-sign-coast-guard-cooperation-pact
193
Ibid.
194
Emily Rauhala, “Duterte renounces U.S., declares Philippines will embrace China,” Washington Post, October,
26, 2016 https://www.washingtonpost.com/world/philippines-duterte-saysgoodbye-washington-and-helloto-
beijing/2016/10/20/865f3cd0-9571-11e6-9cae-2a3574e296a6_story.html?itid=lk_inline_manual_3
71

Minister Ramon Lopez clarified, “What we are saying is that there will be less dependence just
on one side of the world.”
195

Meanwhile, the Philippines was eager to join China’s BRI. For Duterte, who set
infrastructure development as his top economic priority like his predecessor, the Chinese
initiative was highly complementary to his government’s economic growth strategy.
196
In April
2017, the Duterte government launched the “Build, Build, Build” (BBB) Infrastructure scheme
and announced 75 flagship projects involving the construction of rail, airport, road, and bridge
across the country. Two months after he attended the first Belt and Road forum in May 2017,
Duterte announced that his government will raise the government infrastructure spending from
5% to 7% of GDP over the next five years to usher the Philippines in the “Golden Age of
Infrastructure.”
197

The Philippine leader saw the Chinese initiative largely in economic terms. In his
interview with the Chinese media Xinhua on May 10, 2017, Duterte described the BRI as
“primarily an economic undertaking that will build these connections among the countries, and
result in mutual benefit that includes increased trade and market access.”
198
In addition, he noted
that the Chinese initiative “is in line with [his] administration’s golden age of infrastructure of
increased investments on infrastructure projects” and expressed optimism that the BRI could
serve as a vehicle to enhance ASEAN-China cooperation.
199

195
Nicole Gaouette, Elise Labott and Michelle Kosinski, “White House: ‘Filipino Mike Pence’ tries to walk back
Duterte’s break with US,” CNN, October 21, 2016, https://www.cnn.com/2016/10/20/politics/rodrigo-duterte-us-
interests-philippines/index.html
196
“Interview: Philippines expects to hitchhike onto China's Belt and Road wagon: president,” Xinhua, May 10,
2017, http://www.xinhuanet.com/english/2017-05/10/c_136271699.htm
197
Rodrigo Roa Duterte, “Second State of the Nation Address of Rodrigo Roa Duterte, Official Gazette, July 24,
2017, https://www.officialgazette.gov.ph/2017/07/24/rodrigo-roa-duterte-second-state-of-the-nation-address-july-
24-2017/
198
“Interview: Philippines expects to hitchhike onto China's Belt and Road wagon: president.”
199
Ibid.
72

The U.S.-Philippines bilateral relations steadily improved under the Trump
administration. Despite Duterte’s sporadic anti-U.S. rhetoric, the U.S. continued its military
cooperation with the Philippines, including the technical and intelligence assistance to support
the Philippines’ counterinsurgency campaigns. Trump and Duterte met on the sidelines of the
ASEAN summit held in Manila on November 13, 2017. Duterte welcomed Trump but showed
reservation to Trump’s offer to Vietnam that the U.S. will help “mediate” the South China Sea
dispute. “The South China Sea is better left untouched, nobody can afford to go to war,” Duterte
reportedly said to ASEAN leaders.
200
“Today, China is the No. 1 economic powerhouse, and we
have to be friends,” he added.
201

Despite U.S. growing criticism against China’s BRI, the Philippines formally joined the
Chinese initiative during Xi’s state visit to the country on November 20-22, 2018. In addition to
the BRI cooperation agreement, the Philippine and Chinese governments signed 28 other
agreements involving bilateral cooperation in oil and gas development, and railway,
telecommunications, road, and bridge infrastructure projects in the Philippines.
202
Philippine
officials actively supported their country’s participation in the BRI, expecting that the enhanced
connectivity would stimulate the country’s economic growth and improve market access for
Philippine exports, such as tropical fruits.
203
At the same time, they dismissed the U.S. warning

200
Shi Jiangtao and Liu Zhen, “‘Better left untouched’: Philippines and Vietnam wary of Trump offer to mediate
South China Sea disputes,” South China Morning Post, November 12, 2017,
https://www.scmp.com/news/china/diplomacy-defence/article/2119551/better-left-untouched-philippines-and-
vietnam-wary
201
Julie Hirschfeld Davis, “Trump Lauds ‘Great Relationship’ With Duterte in Manila,” New York Times, November
13, 2017, https://www.nytimes.com/2017/11/13/world/asia/trump-duterte-philippines.html
202
Pia Ranada, “DOCUMENTS: PH-China deals signed during Xi Jinping visit,” Rappler, November 27, 2018,
https://rappler.com/nation/documents-philippines-china-deals-signed-xi-jinping-visit-november-2018; Dharel
Placido, “LIST: Philippines, China sign 29 deals in Xi Jinping visit,” ABS-CBN News, November 20, 2018,
https://news.abs-cbn.com/news/11/20/18/list-philippines-china-sign-29-deals-in-xi-jinping-visit
203
“Philippines to benefit from Belt and Road Initiative: finance chief,” Xinhua, June 20, 2017,
http://www.xinhuanet.com/english/2017-06/20/c_136380392.htm
73

about China’s debt-trap diplomacy. On November 26, 2018, Finance Secretary Dominguez
assured that “There’s no danger of [the Philippines] being drowned by Chinese debt.”
204

During his visit to the Philippines on February 28, 2019, U.S. Secretary of State Mike
Pompeo reaffirmed the U.S. security commitment to the Philippines, explicitly stating that “As
the South China Sea is part of the Pacific, any armed attack on Philippine forces, aircraft or
public vessels in the South China Sea will trigger mutual defense obligations under Article 4 of
our mutual defense treaty.”
205
Duterte leveraged U.S. security assurance against China in June
2019 when tension flared over the Recto Bank incident. He said, “I’m calling now America. I am
invoking the RP-US pact, and I would like America to gather their Seventh Fleet in front of
China.”
206

Despite that, Duterte’s economic pivot toward China continued. On August 28, 2019,
Duterte made his fifth visits to China to attend the second Belt and Road forum. The government
official touted that Duterte’s trip to China will generate $10 billion worth of investment and trade
agreements and create more than 20,000 jobs.
207
However, Duterte’s China policy and
infrastructure program also came under close domestic scrutiny.
208
In response to growing

204
Ben O. de Vera, “There’s no danger of us being drowned by Chinese debt’ – Dominguez,” Inquire.net,
November 26, 2018, https://business.inquirer.net/261220/theres-no-danger-of-us-being-drowned-by-chinese-debt-
dominguez#ixzz6Xn58gjoE
205
Regine Cabato and Shibani Mahtani, “Pompeo promises intervention if Philippines is attacked in South China
Sea amid rising Chinese militarization,” Washington Post, February 28, 2019,
https://www.washingtonpost.com/world/pompeo-promises-intervention-if-philippines-is-attacked-in-south-china-
sea-amid-rising-chinese-militarization/2019/02/28/5288768a-3b53-11e9-b10b-f05a22e75865_story.html
206
“Duterte invokes military pact with US amid South China Sea dispute” CNN Philippines, July 17, 2019,
https://cnnphilippines.com/news/2019/7/17/Duterte-Philippines-US-Mutual-Defense-Treaty-South-China-Sea.html
207
Anna Gabriela A. Mogato, “PH to get $10B in deals, investments from Duterte's China visit – DTI,” Rappler,
April 23, 2019, https://www.rappler.com/business/philippines-to-get-deals-investments-from-duterte-china-visit
208
Arianne Merez, “Courting China again: What’s on the line for Duterte in Beijing return,” ABS-CBN News, April
24, 2019, https://news.abs-cbn.com/spotlight/04/24/19/courting-china-again-whats-on-the-line-for-duterte-in-
beijing-return; Joyce Ilas, Drilon: 'Build, Build, Build' is a dismal failure,” CNN Philippines, November 12, 2019,
https://www.cnnphilippines.com/news/2019/11/12/frank-drilon-build-build-build.html
74

skepticism, Philippine Foreign Secretary Teodoro Locsin admitted in September that China’s
pledged economic assistance and investment “hardly materialized.”
209

Duterte responded to domestic criticisms about his China policy. During his State of the
Nation Address in July 2020, he acknowledged the Philippines’ vulnerability in the South China
Sea dispute with China: “China has the arms. We do not have it…They are in possession of the
property… so what can we do?”
210
But he also made clear his opposition to a military approach.
Three months later, Duterte in his speech before the UN General Assembly brought up the 2016
arbitration ruling and affirmed his government’s commitment to it. “The [2016 Arbitral] Award
is now part of international law, beyond compromise and beyond the reach of passing
governments to dilute, diminish or abandon. We firmly reject attempts to undermine it,” he
added.
211
Duterte’s speech raised questions about whether his stance on the ruling had changed.
Presidential spokesperson Harry Roque flatly denied that there had been any change in the
Duterte government’s stance on the arbitration ruling from the start.
212
But he also indicated
there would be little change in Duterte’s China policy, saying that “we would probably accept
the fact that there will be no resolution in the near future as far as the territorial dispute is
concerned but let’s proceed on matters that we could move forward with such as investment and
trade.”
213

209
Richard Javad Heydarian, “Duterte still waiting for China’s ballyhooed bonanza,” Asia Times, September 30,
2019, https://asiatimes.com/2019/09/duterte-still-waiting-for-chinas-ballyhooed-bonanza/
210
Cliff Venzon, “Duterte says Beijing is 'in possession' of South China Sea,” Nikkei Asia, July 27, 2020,
https://asia.nikkei.com/Politics/International-relations/South-China-Sea/Duterte-says-Beijing-is-in-possession-of-
South-China-Sea
211
“FULL TEXT: President Duterte's speech at the 75th UN General Assembly,” Rappler, September 23, 2020,
https://www.rappler.com/nation/full-text-duterte-unga-speech-2020
212
Krissy Aguilar, “Palace: Duterte’s stance on arbitral ruling vs China ‘consistent’,” Inquier.net, September 23,
2020, https://globalnation.inquirer.net/191127/palace-dutertes-stance-on-arbitral-ruling-vs-china-
consistent#ixzz6ujAkWQoP
213
Ibid.
75

Australia’s Strategic Realignment with the United States
Australia has an abiding interest in the Southwest Pacific that is
secure strategically, stable economically and sovereign politically.
This is not just our region, or our neighbourhood. This is our home.

--Prime Minister Scott Morrison--
214

Introduction
Australia’s strategic dilemma between the United States and China is no less strong
compared to other Asian countries. On the one hand, Australia has been a strong U.S. ally since
the conclusion of the ANZUS treaty in 1951. On the other hand, Australia has a comprehensive
strategic partnership with China, with the country being a critical market and the key driver of
Australia’s resource boom since the early 2000s. Moreover, as discussed in Chapter 4, Australia
is the most China-dependent economy among the U.S. allies in terms of bilateral trade. In 2019,
the country’s export and import dependence on China was 38.67% and 25.71%, compared to its
export and import dependence on the U.S. of 3.82% and 11.84%.
215

Australian leaders have expressed strong reservation to choose sides between the U.S.
and China. In his public speech in 2011, Turnbull said, “As China rise to become the world’s
largest economy and in time a military rival, if not an equal, of the United States, we are
presented with a nation whose institutions and culture are very different to ours. Yet, China
is…our largest trading partner and in large measure responsible for our current and prospective

214
Department of the Prime Minister and Cabinet, “Australia and the Pacific: A new Chapter,” November 8, 2018,
https://www.pm.gov.au/media/address-australia-and-pacific-new-chapter
215
WITS.
76

prosperity. We have every reason, and indeed every aspect, of remaining close and becoming
closer friends of those giants.”
216

Australia is a middle power by the standard metrics. But the country retains a major
power status in Oceania and possesses a dominant influence over South Pacific countries. If the
balance of relative interest theory is correct, Australia’s assessment of relative interest should
vary, depending on the geographical scope of China’s initiative. That is, when the Chinese
initiative affects East Asia exclusively, higher economic gains perceived should motivate
Australia to pursue its economic interest and align with China. However, when China’s initiative
reaches Australia and directly affects the status quo within its region, higher strategic risks
perceived should prompt Australia to prioritize its strategic interest and align with the U.S. to
defend the status quo. This study finds strong support for Hypotheses 5 and 6.

Asian Infrastructure Investment Bank
Starting from early 2013, China’s maritime expansion and reclamation activities in the
South China Sea raised concern in Australia. Although the country is not a claimant in maritime
disputes in the East and South China Seas, protecting the open sea lanes is vital to Australia’s
national security. In October 2013, the U.S., Japan, and Australia held a trilateral strategic
dialogue and issued a joint statement expressing their opposition to “any coercive or unilateral
actions that could change the status quo in the East China Sea” and “affirm[ing] the importance
of peace and stability, respect for international law, unimpeded trade and freedom of navigation
in the South China Sea.”
217
Shortly after China declared the ADIZ in November 2013,

216
Malcolm Turnbull, A Bigger Picture (Melbourne: Hardie Grant Books, 2020), chap. 34, Kindle.
217
U.S. Department of State, “Trilateral Strategic Dialogue Joint Statement,” October 4, 2013, https://2009-
2017.state.gov/r/pa/prs/ps/2013/10/215133.htm
77

Australia’s Foreign Minister Julie Bishop issued a statement reiterating Australia’s opposition.
218
The Chinese foreign ministry protested her statement, calling “Australia's irresponsible
statements on the East Sea air defense identification zone are completely mistaken.”
219
The
tension continued at the Australia-China bilateral strategic dialogue held on December 6, 2013,
where Foreign Ministers Wang Yi and Julie Bishop unusually exchanged criticisms against each
other before the cameras.
Against this backdrop, China invited Australia to join the AIIB in around February 2014.
Australia’s initial response was largely mixed. On the one hand, some cabinet members,
including Prime Minister Tony Abbott, viewed China’s initiative in a positive light given the
massive infrastructure gap in Asia and Australia’s perceived gains from the infrastructure
development in the region.
220
Treasurer Joe Hockey and Trade and Investment Minister Andrew
Robb strongly advocated Australia’s participation based on the economic rationale. In his public
speech, Hockey said:
[AIIB] is good for Australia, as it will lift economic growth in the region, as well
as provide direct opportunities for Australian firms to sell and market their world
leading infrastructure expertise. A new pipeline built in Indonesia may well carry
Australian LNG. A new railway built in Vietnam may well transport Australian
agriculture. A new port built in India may well accept iron ore shipments. Better
infrastructure in Asia is a massive win for Australia.
221

218
Australian Department of Foreign Affairs and Trade, “China's announcement of an air-defence identification
zone over the East China Sea,” November 26, 2013, https://www.foreignminister.gov.au/minister/julie-
bishop/media-release/chinas-announcement-air-defence-identification-zone-over-east-china-sea
219
Stephen McDonell and Jane Cowan, “China warns Julie Bishop's 'irresponsible' criticism of new air zone could
hurt relations,” ABC News, November 28, 2013, https://www.abc.net.au/news/2013-11-27/china-rejects-australian-
criticism-of-new-air-zone/5120920?nw=0
220
Paul Kelly, “Strategy fears sank China deal,” The Australian, October 30, 2014,
https://www.theaustralian.com.au/nation/foreign-affairs/strategy-fears-sank-china-deal/news-
story/da1018e97367a4827dc47017f7be4eab
221
The Treasury, “The Next Wave of Global Economic Growth,” April 21, 2015,
http://ministers.treasury.gov.au/ministers/joe-hockey-2015/speeches/next-wave-global-economic-growth-speech-
morgan-stanley-event-new
78

Yet, there was also concern within the Australian government since China’s initial
proposal to create the AIIB lacked details about the bank’s design, governance structure, and
other arrangements. As a result, the cabinet established a set of preconditions for Australia’s
participation in the bank. Australian officials maintained close communication with Chinese
officials to collect more information about the bank while at the same time trying to ensure that
the AIIB is an inclusive and multilateral institution. To that end, the Australian officials provided
a list of nine provisions to the Chinese officials in August 2014. These nine provisions were: 1)
open membership to all countries; 2) protection of minority shareholders’ interests; 3) no one-
country dominance in the bank; 4) assurance that the board of directors have control over key
investment decisions; 5) high lending standards including the debt sustainability; 6) transparent
management, open procurement, fiduciary controls, and social and environmental safeguards; 7)
assurance that investment decisions be made similar to practices in other multilateral
development banks; 8) selection of staff based on merits and competitive process; and 9) the
memorandum of understanding and language in it to be less treaty-like.
222

As the application deadline to become a prospective founding member of the bank
approached near in October 2014, Australia’s decision became more complicated. On the one
hand, U.S. President Barack Obama and U.S. Secretary of State John Kerry reportedly asked
Abbott not to sign up to the bank, putting to the test the solidarity of the U.S.-Australian
alliance.
223
On the other hand, Abbott’s cabinet was internally divided. In opposition to Hockey

222
The Senate Economics Legislation Committee, “Asian Infrastructure Investment Bank Bill 2015 [Provision]”
(Canberra: Parliament House, 2015), 7. This report can be accessed at
https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Asian_Infrastructure_2015/Report
223
Phillip Coorey and Lisa Murray, “Kerry to PM: steer clear of China bank,” The Australian Financial Review,
October 24, 2014, ProQuest.; Goh, “Three Major Nations Absent as China Launches W. Bank Rival in Asia.”;
Phillip Coorey and Greg Earl, “Tony Abbott held talks with Shinzo Abe before decision on China bank,” The
Australian Financial Review, November 1, 2014 https://www.afr.com/world/asia/tony-abbott-held-talks-with-
shinzo-abe-before-decision-on-china-bank-20141101-11fasc; John Kehoe, “We didn't veto Asia bank: US:
Finance,” The Australian Financial Review, January 24, 2015, ProQuest.
79

and Robb’s economic arguments, Bishop stressed Australia’s strategic interest, arguing that the
AIIB, without the proper governance rules and high standards in place, could become China’s
tool to pursue its geostrategic interest.
224
She also warned of China’s growing clout over the
South Pacific countries, which she argued could be turned into China’s “direct military
advantage.”
225
Contending that China will go ahead and launch the bank, Hockey insisted
Australia’s participation even on the strategic grounds so that the country could stay informed
about AIIB’s lending to the South Pacific countries and exercise its influence from within.
226

After fierce internal debates, strategic considerations prevailed when the National
Security Committee of Cabinet (NSCC) voted against Australia’s participation, with Abbott
siding with Bishop’s strategic arguments.
227
As a result, the Abbott government did not send a
delegation to the AIIB’s launching ceremony, a move widely seen as Australia’s alignment with
the United States. At the APEC summit in mid-November 2014, Abbott explained Australia’s
decision, saying that “[the AIIB] got to be a multilateral institution with the kind of transparency
and the kind of governance arrangements that...the World Bank has.”
228
Obama welcomed
China’s new efforts to contribute to regional economic growth and poverty reduction. But he
also sent a clear message: “we want to see China successful…But as they grow, we want them to
be a partner in underwriting the international order – not undermining it.”
229

224
Kelly, “Strategy fears sank China deal.”
225
Ibid.
226
Phillip Coorey, “Australia offered top role in China’s $57b infrastructure bank,” The Australian Financial
Review, November 3, 2014, https://www.afr.com/world/asia/australia-offered-top-role-in-china-s-57b-
infrastructure-bank-20141103-11fuhm
227
Kelly, “Strategy fears sank China deal.”
228
Gabrielle Chan, “Australia won't join Asian infrastructure bank 'until rules change” The Guardian, October, 31
2014, https://www.theguardian.com/australia-news/2014/oct/31/australia-wont-join-asian-infrastructure-bank-until-
rules-change
229
Department of the Prime Minister and Cabinet, “Joint Press Conference, Beijing,” November 10, 2014,
https://pmtranscripts.pmc.gov.au/release/transcript-23947
80

After European countries decided to join the AIIB in mid-March 2015, the Abbott
government’s stance began to evolve. Hockey welcomed European countries’ participation,
saying that it would add “another layer of good corporate governance” and “should be reassuring
to the United States and other countries, including Japan.”
230
Amid strong domestic voices for
Australia’s participation, the Abbott government proactively moved to secure assurance from
China on five conditions—open membership, high levels of transparency, no restriction on
procurement of goods or services, high lending standards, and merit-based recruitment. When
there was little progress, the cabinet decided to sign up and negotiate from the inside instead of
waiting until Australia’s entry preconditions could be met. On March 29, 2015, Abbott issued a
joint statement with Bishop and Hockey and announced Australia’s conditional participation.
The joint statement read:
…Good progress has been made on the bank's design, governance and
transparency over the past few months, but we still have issues that we will
address through ongoing consultations. Key matters to be resolved before
Australia considers joining the AIIB include the Bank’s Board of Directors
having authority over key investment decisions, and that no one country control
the bank..…the AIIB has the potential to play a valuable role in addressing
infrastructure needs and boosting economic growth in the region with potential
benefits for Australia.
231

Australia’s announcement of conditional participation coincided with the lowering
tension between the U.S. and China. Speaking at the Boao Forum on March 28, 2015, Xi made
clear that the AIIB is an “open initiative” and will “advance complementary and coordinated
development” in cooperation with the ADB and World Bank.
232
Two days later, U.S. Treasury

230
The Treasury, “Australia China Business Council: Canberra Networking Day Q&A,” March 25, 2015,
http://ministers.treasury.gov.au/ministers/joe-hockey-2015/transcripts/australia-china-business-council-canberra-
networking-day-qa
231
Department of the Prime Minister and Cabinet, “Asian Infrastructure Investment Bank,” March 29, 2015,
https://pmtranscripts.pmc.gov.au/release/transcript-24327
232
Chinese Ministry of Foreign Affairs, “Full text of the Chinese President's speech at Boao Forum for Asia,”
March 28, 2015, https://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpcxbayzlt2015nnh/t1250690.shtml
81

Secretary Jacob Lew welcomed China’s new regional initiative and expressed U.S. willingness
to cooperate with it. His public statement came after his meeting with the Chinese leadership,
who reaffirmed China’s commitment to the existing international institutions and its shared
interest in preserving and maintaining high standards of global governance.
On June 24, 2015, after months of intense negotiations among 57 countries to develop the
AIIB charter, Australia announced its formal participation as the sixth-largest shareholder.
Hockey and Bishop in their joint media release indicated that Australia’s participation will open
the door to “great opportunities...to drive economic growth and jobs” and “for Australian
businesses to take advantage of the growth in infrastructure in the region.”
233
Both officials also
assured that the bank would be governed based on “best practice” and “in an open and
transparent manner.”
234
“We are absolutely satisfied that the governance arrangements now in
place will ensure that there is appropriate transparency and accountability in the Bank,” Hockey
in a separate media interview said, “I have spoken with the Secretary of the US Treasury Jack
Lew about it in the last 48 hours. And we’ve also spoken with the Japanese Government to
address their concerns. At the same time, the proposal went through Cabinet unanimously.”
235

Belt and Road Initiative
The bilateral discussion on the BRI gained momentum after Chinese President Xi visited
Australia in November 2014. In his address before the Australian Parliament on November 17,
2014, Xi called Oceania “a natural extension of the ancient maritime Silk Road” and proposed

233
The Treasury, “Australia to Join the Asia Infrastructure Investment Bank,” June 24, 2015,
https://ministers.treasury.gov.au/ministers/joe-hockey-2015/media-releases/australia-join-asian-infrastructure-
investment-bank
234
Ibid.
235
The Treasury, “Interview on PVO Newsday, Sky News, Canberra,” June 24, 2015,
http://ministers.treasury.gov.au/ministers/joe-hockey-2015/transcripts/interview-pvo-newsday-sky-news-canberra
82

infrastructure connectivity as a new area of bilateral cooperation between China and Australia.
236

Xi also extended his support to Australia’s own infrastructure development plan and expressed
China’s readiness to welcome Australia’s participation in his signature initiative. Two years
later, his proposal for infrastructure cooperation became more specific. When Prime Minister
Malcolm Turnbull made his first official visit to China in April 2016, Xi called for the
“alignment” of China’s infrastructure initiative with Australia’s $5 billion infrastructure
development plan in northern Australia.
237
When two leaders met again on the sidelines of the G-
20 Hangzhou summit in September 2016, Xi asked Turnbull to “accelerate the alignment”
between two countries’ infrastructure initiatives.
238

China’s BRI garnered strong support from the Australian business community, state and
territory governments, and the opposition Labor party.
239
Business leaders viewed the Chinese
initiative as a huge economic opportunity for Australian companies and established an advisory
group to facilitate their participation in BRI projects.
240
Since infrastructure development was an
urgent issue for its struggling economy, the Northern Territory government also welcomed Xi’s
proposal.
241
In August 2015, the Abbott government discussed the BRI with Chinese officials at

236
“Full text of Chinese President Xi Jinping's address to Australia's Parliament,” Straits Times, November 19,
2014, https://www.straitstimes.com/asia/australianz/full-text-of-chinese-president-xi-jinpings-address-to-australias-
parliament
237
Geoff Raby, “Northern Australia takes its place on Xi Jinping's new silk road map,” Australian Financial
Review, May 11, 2016, https://www.afr.com/opinion/northern-australia-takes-its-place-on-xi-jinpings-new-silk-road-
map-20160511-gos84v
238
Chinese Ministry of Foreign Affairs, “Xi Jinping Meets with Prime Minister Malcolm Turnbull of Australia,”
September 4, 2016,
https://www.fmprc.gov.cn/mfa_eng/topics_665678/XJPCXBZCESGJTLDRDSYCFHJCXYGHD/t1395060.shtml
239
For more information on state and territory governments’ response, see Elena Collinson, “Australia and the Belt
and Road Initiative: Overview,” Australia-China Relations Institute, December 5, 2017,
https://www.australiachinarelations.org/content/australia-and-belt-and-road-initiative-overview#_ftn6
240
Jamie Smyth, “Australia Rejects China Push on Silk Road Strategy,” Financial Times, Mar 22, 2017,
https://www.ft.com/content/e30f3122-0eae-11e7-b030-768954394623
241
Ibid. Also see Jano Gibson, “What is the NT Government's stance on China's Belt and Road Initiative?” ABC
News, August 15, 2020, https://www.abc.net.au/news/2020-08-16/is-the-nt-signed-up-to-chinas-belt-and-road-
initiative/12544780
83

the Australia-China Strategic Economic Dialogue and agreed to establish working groups to
explore ways to work together on infrastructure development in northern Australia.
242

However, after the Northern Territory government leased the Darwin Port to the Chinese-
owned Landbridge Group for 99 years in October 2015, foreign acquisitions of critical
infrastructure quickly became national security concerns within the Australian government.
Given the port’s proximity to a military base used by U.S. marines exercising in Darwin, the deal
became an issue of serious security concern for the U.S. government and was brought up during
Turnbull’s first summit meeting with Obama in November 2015.
243
The fact that the port’s
business transaction deal had been formally approved by the Department of Defence but not
assessed by the Foreign Investment Review Board prompted Turnbull to launch an investigation
probe into the country's foreign investment rules. In late November 2015, his government
adopted tougher foreign investment screening through the passage of the Foreign Acquisitions
and Takeovers Legislation Amendment Bill. Turnbull made clear that the new legislation was
not aimed at the Chinese investors but was “to make sure there [weren’t] gaps in the law.”
244
In
August 2016, the Australian government rejected the sales of Ausgrid, Australia’s largest
electricity network operator, to a Chinese bidder based on the “national security” grounds.
245
In
January 2017, the Australian government also set up a Critical Infrastructure Centre (CIC) to
protect Australia’s key infrastructure and strategic assets from a foreign takeover.

242
The Treasury, “Australia-China Strategic Economic Dialogue promotes investment in regional infrastructure,”
August 13, 2015, https://ministers.treasury.gov.au/ministers/joe-hockey-2015/media-releases/australia-china-
strategic-economic-dialogue-promotes
243
Phillip Coorey and Laura Tingle, “‘Let us know next time’: How Obama chided Turnbull over Darwin port sale,”
The Australian Financial Review, November 18, 2015, https://www.afr.com/politics/let-us-know-next-time-how-
obama-chided-turnbull-over-darwin-port-sale-20151118-gl1qkg
244
Jonathan Pearlman, “Aussie PM seeks to tighten rules on foreign investment,” Straits Times, December 1, 2015,
https://www.straitstimes.com/asia/australianz/aussie-pm-seeks-to-tighten-rules-on-foreign-investment
245
Paul Karp, “Scott Morrison blocks Ausgrid sale on national security grounds,” The Guardian, August 10, 2016,
https://www.theguardian.com/australia-news/2016/aug/11/scott-morrison-blocks-ausgrid-sale-on-national-security-
grounds
84

Meanwhile, the Turnbull government continued to deepen Australia’s strategic
partnership with the U.S. and Japan. During his bilateral summits with Abe and Obama in
December 2015 and January 2016, Turnbull reaffirmed Australia’s commitment to the rules-
based international order.
246
The new Defense White Paper released in February 2016 mentioned
“ruled-based” 56 times throughout the paper, reflecting the Australian government’s acute
strategic concerns in the evolving security environment in the Asia-Pacific region.
247
In July
2016, after The Hague Arbitral Tribunal announced its ruling in favor of the Philippines’
position, Australia joined the U.S. and Japan in calling on both China and the Philippines to
abide by the ruling.
248
Yet, there seemed little policy consultation or coordination on the BRI.
The Chinese initiative received little pushback from the Obama administration, contrary to its
strong opposition to the AIIB.
249
In fact, much political capital was spent on the TPP agreement
as trade ministers from twelve countries concluded their negotiations in October 2015. The
situation changed little after Donald Trump took office in the U.S. in January 2017. In the first
several months, the new U.S. government was relatively quiet, if not indifferent, about the BRI.
The Turnbull government began to mull over Xi’s BRI proposal amid China’s push for
Australia’s participation since around September 2016. At the Australia-China Foreign and
Strategic Dialogue held in February 2017, Foreign Ministers Wang Yi and Julie Bishop explored

246
Japanese Ministry of Foreign Affairs, “Prime Minister Abe and Prime Minister Turnbull Joint Statement,”
December 18, 2015, https://www.mofa.go.jp/a_o/ocn/au/page4e_000362.html; White House, “Remarks by
President Obama and Prime Minister Turnbull of Australia Before Bilateral Meeting,” January 19, 2016,
https://obamawhitehouse.archives.gov/the-press-office/2016/01/19/remarks-president-obama-and-prime-minister-
turnbull-australia-bilateral
247
Crispin Rovere, “Defence White Paper 2016: Eight strategic observations,” The Lowy Institute, February 29,
2016, https://www.lowyinstitute.org/the-interpreter/defence-white-paper-2016-eight-strategic-observations
248
Japanese Ministry of Foreign Affairs, “Japan-United States-Australia Trilateral Strategic Dialogue Joint
Statement” July 25, 2016, https://www.mofa.go.jp/a_o/ocn/page3e_000514.html
249
For more information about U.S. response toward China’s Belt and Road Initiative, see Joel Wuthnow, “From
Friend to Foe-ish: Washington’s Negative Turn on the Belt and Road Initiative,” The Asan Forum, May 21, 2018,
http://www.theasanforum.org/from-friend-to-foe-ish-washingtons-negative-turn-on-the-belt-and-road-initiative/#60
85

the possibility of linking their countries’ infrastructure initiatives. But the talks ended without
any decision. The Turnbull government held two rounds of cabinet discussions to decide
Australia’s participation in the BRI. While the Department of Foreign Affairs and Trade was
internally divided, the heads of Immigration and Defense Departments strongly opposed based
on “strategic” concerns.
250
In the end, the cabinet concluded that there was little net gain for
Australia from its participation.
251
“The economic case for Australia formally joining simply
wasn't made,” one senior government official noted, “We saw very little in additional economic
benefit for signing up, but a lot of negative strategic consequences if we accepted Beijing’s
offer.”
252
Another participant said, “If we had thought there were big economic gains the
decision would have been more difficult.”
253

On March 24, 2017, Australia formally declined Xi’s invitation. During his meeting with
Chinese Premier Li Keqiang, who was on a state visit to Australia, Turnbull said, “we would be
delighted to work on specific projects, but we would not sign up to a slogan when we had no
control over its content or substance.”
254
However, the Turnbull government did not completely
overlook economic opportunities for Australian companies. Four months after Trade,
Investment, and Tourism Minister Steven Ciobo attended the Belt and Road forum in May 2017,
Australia and China signed the agreement on investment and infrastructure cooperation in the

250
Andrew Greene and Andrew Probyn, “One Belt, One Road: Australian 'strategic' concerns over Beijing's bid for
global trade dominance,” ABC News, October 22, 2017, https://www.abc.net.au/news/2017-10-22/australian-
concerns-over-beijing-one-belt-one-road-trade-bid/9074602
251
Paul Kelly, “Cabinet saw no gain in Xi Jinping’s ‘project of the century’,” The Australian, May 29, 2017,
https://www.theaustralian.com.au/national-affairs/foreign-affairs/cabinet-saw-no-gain-in-xi-jinpings-project-of-the-
century/news-story/098f7cfd460bc1ecc95468ed566871c4
252
Greene and Probyn, “One Belt, One Road.”
253
Paul Kelly, “China deal: Sovereignty rules with the flex of constitutional muscle,” The Australian, September 24,
2020, https://www.theaustralian.com.au/inquirer/china-deal-sovereignty-rules-with-the-flex-of-constitutional-
muscle/news-story/62d74e738265f519b80b236b9b7d115e
254
Josh Taylor, “China's belt and road initiative: what is it and why is Victoria under fire for its involvement?,”
The Guardian, May 25, 2020, https://www.theguardian.com/world/2020/may/25/chinas-belt-and-road-initiative-
what-is-it-and-why-is-victoria-under-fire-for-its-involvement
86

third-party countries. But China’s hope for Australia’s direct participation was dashed again in
October 2017 when Turnbull insisted on Australia’s participation in “specific projects and
investments rather than engaging in generalities.”
255

The Turnbull government released the 2017 Foreign Policy White Paper on November
23, 2017. The White Paper described growing geoeconomics competition in the Asia-Pacific
region, noting that “trade, investment, and infrastructure development are being used as
instruments to build strategic influence, as well as to bring commercial advantage.”
256
The White
Paper also indicated that the existing international cooperation principles, including robust social
and environmental safeguards, will guide Australia’s approach toward infrastructure
cooperation.
257
In addition, the White Paper underlined Australia’s engagement with the South
Pacific, noting that “step[ping] up support for a more resilient Pacific and Timor-Leste” is vital
to Australia’s security and prosperity.
258

As the Chinese investment began to make inroads into the South Pacific region, China’s
economic clout over the Pacific countries raised acute geostrategic concern in Australia. Back in
September 2016, the Turnbull government announced a “step change” in Australia’s engagement
with the Pacific countries. When Papua New Guinea became the second Pacific country to sign
up to the BRI on June 25, 2018, Bishop expressed concern about Pacific countries’ participation
in the BRI, warning that “the consequences of entering into some of these financing

255
“Turnbull plays down Belt and Road fears,” SBS News, October 23, 2017,
https://www.sbs.com.au/news/turnbull-plays-down-belt-and-road-fears
256
Australian Department of Foreign Affairs and Trade, 2017 Foreign Policy White Paper (November 2017), 44.
https://www.dfat.gov.au/publications/minisite/2017-foreign-policy-white-paper/fpwhitepaper/pdf/2017-foreign-
policy-white-paper.pdf
257
Ibid, 45.
258
Ibid, 3.
87

arrangements will be detrimental to their long-term sovereignty.”
259
“Where BRI projects are in
our sphere of influence, we want to ensure that they meet appropriate standards,” she added.
260

The Turnbull government took several measures to strengthen its ties with the Pacific
countries. In July 2018, for instance, Australia reached its agreement with Papua New Guinea
and the Solomon Islands to construct high-speed underwater internet cables linking three
countries. In the same month, Australia, the U.S., and Japan launched the trilateral infrastructure
partnership to support infrastructure development in the Indo-Pacific and provide alternative
financing options based on the principles of openness, transparency, and fiscal accountability.
261

After Scott Morrison became prime minister in August 2018, he announced Australia’s
“Pacific Step-up”, elevating Australia’s pivot toward the South Pacific to a new level. In his
public speech on November 8, 2018, he called the Pacific “front and centre of Australia’s
strategic outlook” and stressed Australia’s national security was “intertwined” with the
Pacific.
262
Morrison went further and declared: “This is our patch. This is our part of the world.
This is where we have special responsibilities... We are connected as members of a Pacific
family.”
263
To demonstrate Australia’s commitment to the Pacific countries, Morrison unveiled a
few government initiatives, including his plan to establish an Australian Infrastructure Financing
Facility for the Pacific (AIFFP) and invest $2 billion to fund “high priority infrastructure” in
Pacific countries and Timor Leste.
264
His government also reached an agreement with Papua

259
David Wroe, “Australia will compete with China to save Pacific sovereignty, says Bishop,” The Sydney Morning
Herald, June 18, 2018, https://www.smh.com.au/politics/federal/australia-will-compete-with-china-to-save-pacific-
sovereignty-says-bishop-20180617-p4zm1h.html
260
Ibid.
261
Australian Department of Foreign Affairs and Trade, “Australia, US and Japan announce trilateral partnership for
infrastructure investment in the Indo-Pacific,” July 31, 2018, https://www.foreignminister.gov.au/minister/julie-
bishop/media-release/australia-us-and-japan-announce-trilateral-partnership-infrastructure-investment-indo-pacific
262
Department of the Prime Minister and Cabinet, “Australia and the Pacific: A new chapter,” November 8, 2018,
https://www.pm.gov.au/media/address-australia-and-pacific-new-chapter
263
Ibid.
264
Ibid.
88

New Guinea to build a joint naval base in Manus Island.
265
In the same month, Australia, the
U.S., and Japan under their trilateral infrastructure partnership agreed to build a power grid in
Papua New Guinea. In 2019, lending agencies of these three countries, namely America's
Overseas Private Investment Corporation (OPIC), the Japan Bank for International Cooperation
(JBIC), and Australia's Export Finance and Insurance Corporation (AEFI), selected the LNG
project in Papua New Guinea as their first joint financing project.
Meanwhile, the BRI issue took a new turn in October 2018 when the state government of
Victoria signed agreements with China to participate in the BRI. Premier Daniel Andrews
defended his government decision, claiming that Victoria will benefit from a new partnership
with China through greater trade and investment from the country.
266
But Victoria’s independent
action driven by economic incentives came at odds with the federal government’s stance shaped
by strategic considerations. In June 2020, Morrison expressed his government’s firm position on
the BRI, saying that “we do not believe that it is in Australia’s national interests.”
267
He also
made clear that the federal government determines Australia’s foreign policy. The Morrison
government moved to seek constitutional power to revoke Victoria’s agreement with China, and
this led to the passage of Foreign Relations bill in December 2020.

265
Amy Remeikis, “Scott Morrison and Papua New Guinea's PM agree to joint naval base on Manus Island,” The
Guardian, November 1, 2018, https://www.theguardian.com/australia-news/2018/nov/01/scott-morrison-and-papua-
new-guineas-pm-agree-to-joint-naval-base-on-manus-island
266
Taylor, “China’s Belt and Road Initiative.”
267
Department of the Prime Minister and Cabinet, “Interview with Neil Mitchell, 3AW,” June 11, 2020,
https://www.pm.gov.au/media/interview-neil-mitchell-3aw-4
89

South Korea’s Strategic Balance between the United States and China
For South Korea, the alliance with the U.S. is more important anything in
safeguarding our security...The relationship with China has become more
important not only in terms of economic cooperation, but also for strategic
cooperation for the peaceful resolution of the North Korean nuclear issue.
That is why I am pursuing a balanced diplomacy with the U.S. as well as China.

--President Moon Jae-in--
268

Introduction
Perhaps, no country would feel a strategic dilemma between the U.S. and China stronger
than the Republic of Korea (hereinafter “ROK” or “South Korea”) Geographically, South Korea
is situated at the forefront of the U.S.-China great power rivalry. Moreover, the U.S. is South
Korea’s staunch ally and key security provider while China is its largest economic partner. The
U.S. and South Korea fought together against North Korea during the Korean War. Since the
establishment of the U.S.-ROK Mutual Defense Treaty in 1953, South Korea has continued to
rely on the U.S. security commitment and extended nuclear deterrence against North Korea’s
growing threats. Meanwhile, China, once an adversary during the Korean War, is South Korea’s
close neighbor with thousands of years of historical and cultural ties. Moreover, the country is
also South Korea’s largest trade partner today. In 2019, their bilateral trade volume exceeded
South Korea’s bilateral trade with the U.S. and Japan combined.
269
Furthermore, China
accounted for 25.12% of South Korea’s total export and 21.31% of its total import in 2019,

268
Quoted in Ji-Young Lee, “South Korea’s Strategic Nondecision and Sino-U.S. Competition” in Strategic Asia
2020: U.S.-China Competition for Global Influence, eds. Ashley J. Tellis, Alison Szalwinski, and Michael Wills
(Washington, DC: National Bureau of Asian Research, 2020), 93.
269
WITS. South Korea’s bilateral trade with China in 2019 was US $243,430,695. The sum of South Korea’s
bilateral trade with the U.S. and Japan in 2019 was US $211,703,247.
90

compared with 13.57% and 12.34% for the U.S, respectively.
270
Overall, a former ROK
government official said, “[Koreans] are split between [their] loyalty to the alliance and [their]
chances to sustain the lifestyle [they] have been enjoying” as the U.S.-China competition
continues to deepen.
271

If the balance of relative interest theory is correct, South Korea as a secondary power
located in East Asia should find Chinese economic initiatives with higher economic gains than
strategic risks. As a result, the country is more likely to align with China in pursuit of economic
gains, regardless of the geographical scope of the Chinese initiatives. I find general support for
Hypothesis 3, but not Hypothesis 4.

Asian Infrastructure Investment Bank
When China invited South Korea to join the AIIB in December 2013, South Korea was
receptive to the invitation.
272
Between January and June 2014, South Korean officials attended
three rounds of Multilateral Consultation Meetings hosted by China to discuss Beijing’s plan to
create the new regional financial bank.
273
China’s early invitation to South Korea came amid a
warming relationship between the two countries following ROK President Park Geun-hye’s
(2013-2017) diplomatic overture toward China and her successful state visit to the country on
June 27-30, 2013. The Park government made clear that South Korea’s diplomatic and foreign
policy priority was anchored on its alliance with the U.S. through her state visit to the U.S. in
May 2013. Yet, a new “honeymoon” in the Sino-ROK bilateral relationship, combined with

270
Ibid.
271
Uri Friedman, “How to Choose Between the U.S. and China? It’s Not That Easy,” The Atlantic, July 26, 2019,
https://www.theatlantic.com/politics/archive/2019/07/south-korea-china-united-states-dilemma/594850/
272
“Key dates in the creation of AIIB, S. Korea joining China-led bank,” Yonhap News, June 29, 2015,
https://en.yna.co.kr/view/AEN20150626005500320?section=search
273
Ibid.
91

South Korea’s strained ties with Japan over resurgent historical disputes, complicated U.S.
strategy to enhance U.S.-Japan-ROK trilateral cooperation as the U.S. was rebalancing toward
the Asia-Pacific region.
274
In addition, this seemingly created a perception in Washington that
South Korea was tilting toward China and away from the U.S. and Japan.
275

The U.S.-China tug of war over South Korea began in May 2014 when Chinese Foreign
Minister Wang Yi actively sought South Korea’s participation in the AIIB and asked the Park
government to announce its decision in time for the upcoming summit between Park and Xi in
July 2014.
276
Concern about South Korea’s participation prompted Washington to dissuade its
ally. In early June, Caroline Atkinson, the Deputy National Security Adviser for international
economics, reportedly asked the South Korean government not to participate in the AIIB,
according to the Kyodo News.
277
The South Korean government tread carefully. During a hearing
before the Foreign Affairs and Unification Committee on June 30, ROK Foreign Minister Yoon
Byung-se stated that whether the AIIB issue would become a summit agenda between Xi and Park
remained uncertain.
278
“The relevant government ministries were reviewing China’s proposal,
especially from the perspective of how much it will help South Korea’s economic benefits,” he
added.
279

274
Ellen Kim and Victor D. Cha, “Between a Rock and a Hard Place: South Korea’s Strategic Dilemmas with China
and the United States,” Asia Policy, no 21 (January 2016), 101-121.
275
Hiroyuki Akita, “US jittery over South Korea's tilt toward China,” Nikkei Asia, April 24, 2014,
https://asia.nikkei.com/Politics/US-jittery-over-South-Korea-s-tilt-toward-China2
276
Gwang-Lip Moon and Jin-Seok Park, “U.S. warns Korea against joining China’s bank,” Korea JoongAng Daily,
June 30, 2014, http://koreajoongangdaily.joins.com/news/article/article.aspx?aid=2991318
277
Ibid.
278
Yoon Byung-se, “Testimony before the 326
th
Foreign Affairs and Unification Committee hearing,” The National
Assembly Information System, June 30, 2014. See pages 18-19 of the 1
st
session hearing minutes, which can be
found at http://likms.assembly.go.kr/record/mhs-40-
010.do?classCode=2&daeNum=20&commCode=CI&outConn=Y#none
279
Ibid.
92

However, the AIIB issue was brought up during the summit meeting on July 3, 2014 when
Xi personally asked Park to join the bank. Park responded expressing her support to China’s efforts
to promote regional development. But she neither promised nor rejected South Korea’s future
participation. Five days later, the U.S. government urged caution. In his interview with the
Yonhap News, Sydney Seiler, director for Korea at the National Security Council at the White
House, said, “We see the existing institutions as extremely viable, central ways to contribute to
the needs of the region. [And] that's why we continue to wait and see just how the AIIB might
actually add value to that.”
280
The next day, U.S. State Department spokeswoman Jen
Psaki called on China to “clearly explain how [the AIIB] will complement and add value to
existing institutions.”
281

U.S. and ROK government officials continued their discussion on the AIIB issue
throughout the fall of 2014. At the G20 financial minister’s meeting held on September 20-21,
2014, U.S. Treasury Secretary Jack Lew conveyed U.S. concern to ROK Finance Minister Choi
Kyung-hwan.
282
Two days later, U.S. Secretary of State John Kerry reportedly asked ROK
Foreign Minister Yun Byung-se to delay South Korea’s participation in the AIIB.
283
This high-
level diplomacy by the U.S. senior government officials seemed to have an effect. The Blue
House reportedly instructed the Ministry of Economy and Finance to hold off ongoing

280
Jae-soon Chang, “U.S. official expresses strong skepticism about China's push for new development bank,”
Yonhap News, July 8, 2014, https://en.yna.co.kr/view/AEN20140708000300315?section=search
281
Jae-soon Chang, “U.S. calls for clear explanation on need for Chinese-led new regional bank,” Yonhap News,
July 9, 2014, https://en.yna.co.kr/view/AEN20140709000300315?section=search
282
Donghwan Ahn, “Mi ablyeog-e hangug AIIB yeonnae gaib yubo” [South Korea's AIIB membership postponed
this year due to US pressure], Seoul Shinmun, October 2, 2014,
http://www.seoul.co.kr/news/newsView.php?id=20141002001010
283
Ibid. Also see Jae-soon Chang, “U.S. renews calls for transparency, high standards in China's AIIB push,”
Yonhap News, October 28, 2014, https://en.yna.co.kr/view/AEN20141028000300315?section=search
93

consultations with China on the AIIB issue, and South Korean officials did not attend the
Multilateral Consultation Meeting on September 26-27, 2014 as a result.
284

China also increased its diplomatic effort by dispatching a high-level delegation to South
Korea. On October 21, 2014, Tang Jiaxuan, a former Chinese foreign minister (1998-2003), and
Jin Liqun, an interim AIIB secretariat, met with Park and urged South Korea’s participation.”
285

On the same day, finance ministers of South Korea and China held talks in Beijing and
exchanged their views about the bank. Yet, both sides could not narrow their differences.
Finance Minister Choi Kyung-hwan requested China to address South Korea’s concern about the
bank’s governance structure and safeguard issues.
286
“If such issues are resolved, there will be no
reason for [South Korea] not to join the AIIB,” he said.
287
Three days later, South Korea was
absent at the AIIB launching ceremony.
South Korea’s strategic dilemma between the U.S. and China deepened when the U.S.
Terminal High Altitude Area Defense (THAAD) missile defense system became another
contentious issue. In June 2014, U.S. Forces Korea (USFK) Commander General Curtis M.
Scaparrotti announced that he had requested the U.S. government to deploy the THAAD missile
system to South Korea in response to North Korea’s growing nuclear and missile threats. This
quickly invited a strong protest from China and Russia. Especially, China vehemently opposed
the U.S. THADD deployment in South Korea, insisting that the missile defense system “directly
affects the strategic security interests of China and other Asian countries.”
288

284
Ahn, “Mi ablyeog-e hangug AIIB yeonnae gaib yubo” [South Korea's AIIB membership postponed this year due
to US pressure].
285
Byung-chul Kang, “Jung tangjaswian ‘AIIBneun daese’ hangug cham-yeo gyeoldan choggu” [China's Tang Jia
Xuan Calls for Korea’s decision on AIIB], Yonhap News, October 22, 2014,
https://www.yna.co.kr/view/AKR20141022175700043
286
“S. Korea open to joining China-led infra bank if conditions met: minister,” Yonahp News, October 22, 2014,
https://en.yna.co.kr/view/AEN20141022008700315?section=search
287
Ibid.
288
“China opposes possible US THAAD deployment in ROK,” Chinadaily, February 13, 2016,
94

Since mid-March 2015, the U.S.-China tug-of-war over South Korea intensified. On
March 14, 2015, Foreign Minister Yun Byung-se in his interview with the local newspaper
Dong-A Ilbo made clear that South Korea would make its decision based on the country’s
“national interest” and “without being swaying by neighboring countries.”
289
His remark came
amid U.S. and Chinese government officials’ simultaneous visits to South Korea. On March 16,
2015, Chinese Assistant Minister of Foreign Affairs Liu Jianchao met with ROK Deputy Foreign
Minister for Political Affairs Lee Kyung-soo. Minister Liu restated Beijing’s deep concern about
the U.S. THAAD deployment in South Korea and asked South Korea to “[take] account of
China's concerns and worries.”
290
On the AIIB issue, he expressed China’s hope for South
Korea’s participation.
The next day, U.S. Assistant Secretary of State for East Asian and Pacific Affairs Daniel
Russel met with his Korean counterpart and discussed AIIB and THAAD issues. Russel
reiterated U.S. concern about the AIIB but did not reportedly ask South Korea not to join.
291

After he concluded his talks with the South Korean official, Russel in his press availability called
on countries to “seek unmistakable evidence…[of] the high watermark of what other multilateral
development banks have done in terms of governance.”
292
“Every government can make its own
decision about whether the way to achieve that goal is by joining before the articles of agreement

http://www.chinadaily.com.cn/world/2016-02/13/content_23465685.htm
289
Hyung-nam Bang, “(Nonseol-wiwon-i mannan salam/banghyeongnam) ‘sadeudo, AIIBdo jeoldae jubyeongug-e
hwidulliji anhgo pandanhal geos’” [(Interview with Editorial Writer/ Bang Hyung-nam) ‘Neither THAAD nor AIIB
decision will be swayed by neighboring countries], Dong-A Ilbo, March 16, 2015,
http://www.donga.com/news/article/all/20150316/70139204/1; Also see “National interest must be top priority,”
Dong-A Ilbo, March 17, 2015, https://www.donga.com/en/Search/article/all/20150317/410295/1/National-interest-
must-be-top-priority
290
Soo-yeon Kim, “(5th LD) China voices concern over U.S. THAAD on Korean soil,” Yonhap News, March 16,
2015, https://en.yna.co.kr/view/AEN20150315002655315?section=search
291
Alastair Gale and Rob Taylor, “Decision to Join China-Led Bank Tests South Korea’s Ties to U.S.,” Wall Street
Journal, March 24, 2015, https://www.wsj.com/articles/decision-to-join-aiib-tests-south-koreas-ties-to-u-s-
1427185565
292
Ju-min Park, “Major U.S. allies to join China-backed bank – reports,” Reuters, March 16, 2015,
https://www.reuters.com/article/europe-asia-bank-idINKBN0MD0BA20150317
95

are clarified or by waiting to see what the evidence looks like as the bank starts to operate,” he
added.
293
The following day, U.S. State Department spokeswoman Jen Psaki echoed Russel’s
comments, stating that “As was true with the United Kingdom, the decision of any country to
join is certainly a decision made by a sovereign country. But it will be important for prospective
members of the AIIB to push for the adoption of those same high standards.”
294

Meanwhile, domestic voices calling for South Korea’s participation increased after the
U.K. and other European countries announced their participation in the AIIB. Asia is an
important market for South Korean infrastructure firms, with the annual contract share standing
at 32% between 2010 and 2014.
295
The business community anticipated that South Korea’s
participation would create new business opportunities and help expand their market in Asia.
296

Media and lawmakers joined the business voices, urging the Park government to join.
297
For
instance, the Joongang Ilbo newspaper in its editorial on March 22, 2015 called South Korea’s
participation in the AIIB a “no-brainer” based on economic rationale.
298

In the end, South Korea announced its participation on March 26, 2015, citing economic
benefits for its firms in communications, energy, and transportation.
299
Both the ruling and

293
Ibid.
294
“U.S. says it's up to S. Korea to decide on AIIB,” Yonhap News, March 18, 2015,
https://en.yna.co.kr/view/AEN20150318000400315?section=search
295
“Major Construction Firms to Benefit from Korea Joining AIIB,” BusinessKorea, March 30, 2015,
http://www.businesskorea.co.kr/news/articleView.html?idxno=9834
296
Chung-In Moon and Seung-chan Boo, “Coping with China’s rise: Domestic politics and Strategic Adjustment in
South Korea,” Asian Journal of Comparative Politics 2, no.1 (2017): 13; Bum-soo Kim, “Geonseol-eobgye ‘han
AIIB gaibhamyeon asiasijang hwagdaee geungjeongjeog” [Construction Industry: South Korea’s AIIB membership
to help its market expansion in Asia], ChosunBiz, March 24, 2015,
https://biz.chosun.com/site/data/html_dir/2015/03/23/2015032303031.html; Joon-seung Lee, “(News Focus) AIIB
launch to create new biz opportunities in construction, steel, IT sectors,” Yonhap News, June 29, 2015,
https://en.yna.co.kr/view/AEN20150628003700320?section=search
297
Moon and Boo, “Coping with China’s rise,” 13-14.
298
Jung-jae Yi, “AIIB a no-brainer,” Korea JoongAng Daily, March 22, 2015,
https://koreajoongangdaily.joins.com/news/article/article.aspx?aid=3002216
299
Christine Kim and Choonsik Yoo, “South Korea sees gains for its infrastructure firms from joining AIIB,”
Reuters, March 27, 2015, https://www.reuters.com/article/us-asia-aiib/south-korea-sees-gains-for-its-infrastructure-
firms-from-joining-aiib-idUSKBN0MN08L20150327?edition-redirect=uk
96

opposition parties welcomed the Park government’s decision, noting that South Korea’s
participation in the AIIB “will help domestic firms with experience in overseas construction and
transportation projects to quickly expand overseas.”
300
Three months later, on June 29, 2015,
South Korea signed the AIIB Charter and became the fifth-largest shareholder with a stake of
3.81 percent. In explaining South Korea’s participation, Finance Minister Choi Kyung-hwan
pointed to “a significant improvement” in the bank’s governance issues, including the non-
resident board of directors holding the authority to decide on investment projects.
301
He also
indicated South Korea’s active cooperation with the AIIB to support infrastructure development
in North Korea “if conditions are met.”
302

In her meeting with Chinese Premier Li Keqiang on September 2, 2015, Park requested
China’s support for her government’s plan to launch the Northeast Asia Development Bank
(NEADB), stressing that the NEADB would be “complementary” to the AIIB.
303
The creation of
the NEADB, which was first introduced during Park’s visit to Dresden, Germany in March 2014,
was intended to support economic development in North Korea in exchange for North Korea’s
denuclearization.
304
Three days after Park’s meeting with Li, Finance Minister Choi Kyung-hwan
held talks with his Chinese counterpart Lou Jiwei and said that the NEADB could also
“contribute to regional economic integration in Asia by expanding China's One Belt, One Road
development program to the Korean Peninsula.”
305
In the same month, the Park government also

300
“Parties hail decision to join AIIB amid qualms about THAAD,” Yonhap News, March 27, 2015,
https://en.yna.co.kr/view/AEN20150327003700315?section=search
301
“S. Korea vows active cooperation with AIIB over N. Korea,” Yonhap News, June 29, 2015,
https://en.yna.co.kr/view/AEN20150628004600315?section=search
302
Ibid.
303
“(2nd LD) S. Korea, China agree to make efforts to maximize benefits of FTA,” Yonhap News, September 2,
2015, https://en.yna.co.kr/view/AEN20150902009852315?section=search
304
Yong-bae Shin, “Full text of Park's speech on N. Korea,” The Korea Herald, March 28, 2014,
http://www.koreaherald.com/view.php?ud=20140328001400
305
“S. Korea seeks China's support for new Asia development bank,” Yonhap News, September 5, 2015,
https://en.yna.co.kr/view/AEN20150905001800320?section=search
97

sought U.S. and international support for its new initiative. On September 15, 2015, ROK Vice
Financial Minister discussed South Korea’s development-for-denuclearization deal with his U.S.
counterpart. In her public speech at the G20 summit held in November 2015, Park stressed the
importance of North Korea’s denuclearization and touted that the NEADB, if launched, could
help address the annual US $63 billion infrastructure investment demand in Northeast Asia.
306

Moreover, she made clear that the NEADB would work closely with the ADB and AIIB.
307

However, South Korea’s NEADB proposal became short-lived after it received a strong rebuke
from North Korea.
308

Belt and Road Initiative
South Korea was receptive to China’s BRI from the outset. This was evident during Xi’s
state visit to South Korea in July 2014 when President Park expressed her support, contrary to
her reservation about the AIIB. At the Korea-China Economic and Trade Cooperation Forum
held on July 4, 2014, Park proposed cooperation between their two countries by linking China’s
BRI to South Korea’s Eurasia Initiative.
309
Launched in October 2013, the Eurasia Initiative was
the Park government’s regional development strategy to promote peace and transnational
cooperation in the Eurasian continent. Like China’s BRI, the Eurasia Initiative involved regional
connectivity projects by establishing continental logistics and energy networks, including the
“Silk Road Express” that would connect South Korea’s rail and road system to Europe via North
Korea, China, Central Asia, and Russia.

306
Seung-woo Kang, “President offers fresh aid for NK denuclearization,” The Korea Times, November 16, 2015,
http://m.koreatimes.co.kr/phone/news/view.jsp?req_newsidx=191107
307
Ibid.
308
JH Ahn, “Little hope so far for Park’s N. Korea development plan,” NK News, November 17, 2015,
https://www.nknews.org/2015/11/little-hope-so-far-for-parks-n-korea-development-plan/
309
Sojung Yoon, “Korean, Chinese leaders attend special lunch, economic forum,” Korea.net, July 7, 2014,
https://www.korea.net/NewsFocus/policies/view?articleId=120440
98

One of the key objectives behind the Eurasia Initiative was to promote transnational
economic cooperation and integration. In her keynote address at the Eurasia Conference on
October 18, 2013, Park stated:

Bolstering logistics and energy networks in the region will not only help curtail
logistics costs but also invigorate global trade. It will help stabilize overall prices
of raw materials in the global market, thereby contributing to global economic
growth. On top of this, the establishment of Eurasian transportation and energy
infrastructures will… serve as a catalyst in creating a Eurasian economic bloc
involving landlocked nations in Eurasia, Korea, China and Japan.
310

More broadly, the Eurasia Initiative also manifested Park government’s political and strategic
visions and aspirations concerning North Korea and the Korean peninsula as Park called the
divided Korean peninsula a “Eurasia’s gateway to the Pacific Ocean.”
311

Park’s expressed support to China’s BRI became an impetus in both countries to seek
cooperation between the BRI and Eurasia Initiative for policy synergies. As a result, the two
governments held a joint seminar in July 2015 to explore ways to connect the two initiatives.
312

Three months later, South Korea and China signed the memorandum of understanding on
bilateral cooperation between the two initiatives and in third-party countries to support various
joint cooperation in the infrastructure market in Asia.
313

Nevertheless, infrastructure cooperation between the BRI and Eurasia Initiative came to
an end when the Sino-ROK bilateral relations quickly chilled over South Korea’s decision to
deploy the U.S. THADD system in the country, which came as a U.S.-ROK joint response to

310
“Remarks by President Park Geun-hye at the 2013 International Conference on Global Cooperation in the Era of
Eurasia,” Presidential Archives of Korea, October 18, 2013.
311
Ibid. For more detailed analysis about the Eurasia Initiative, see Balbina Y. Hwang, “Northeast Asian
Perspectives on China’s Belt and Road Initiative: the View from South Korea,” East Asia 36, no. 2 (2019): 143.
312
ROK Ministry of Foreign Affairs, “International Seminar under the Title “Eurasia Initiative and One Belt One
Road” Takes Place,” July 14, 2015, http://www.mofa.go.kr/eng/brd/m_5676/view.do?seq=315462
313
ROK Ministry of Foreign Affairs, “Parkgeunhye daetonglyeong, han·jung MOU seomyeongsig chamseog”
[President Park Geun-hye attends the Korea-China MOU ceremony], October 31, 2015,
https://www.mofa.go.kr/www/brd/m_4076/view.do?seq=356908
99

North Korea’s nuclear and missile tests conducted between January and June 2016. In
announcing the decision on July 8, 2016, ROK and U.S. officials stressed that the THAAD
system, which is a defense measure to protect U.S. and ROK military forces, would “be focused
solely on North Korea” in light of China’s strong objections.
314
Starting from early 2017, reports
of South Korean companies suffering China’s economic retaliation emerged.
315

After Moon Jae-in took office in May 2017, the new progressive government also
envisioned regional connectivity as a way to promote peace, stability, and prosperity on the
Korean peninsula and beyond. In July 2017, the Presidential Committee on the Northern
Economic Cooperation announced the New Northern Policy (NNP) and launched the “New
Economic Map of the Korean Peninsula” with a vision to build three economic belts in the East
Sea, West Sea, and DMZ.
316
The Committee also established the “9-Bridge Strategy” to enhance
South Korea’s regional cooperation with Northeast Asian countries in nine areas: gas, railways,
ports, power generation, North Pole Route, shipbuilding, agriculture, fisheries, and industrial
complex.
317

Starting from summer 2017, South Korea’s security environment deteriorated with
internal and external challenges. The tension escalated on the peninsula following North Korea’s
two ICBM tests in July and a sixth nuclear test in September 2017. This prompted Moon to order
to “temporarily deploy” the additional mobile launchers of the THAAD system in the country,

314
Sang-Hun Choe, “South Korea and U.S. Agree to Deploy Missile Defense System,” New York Times, July 7,
2016, https://www.nytimes.com/2016/07/08/world/asia/south-korea-and-us-agree-to-deploy-missile-defense-
system.html
315
Joyce Lee, “China halts construction at major Lotte project amid THAAD tension,” Reuters, February 7, 2017,
https://www.reuters.com/article/lotte-group-china-idUSL4N1FS5RH
316
The Presidential Committee on the Northern Economic Cooperation,
https://www.bukbang.go.kr/bukbang_en/vision_policy/history/; For more in-depth analysis on South Korea’s New
Economic Map, see Patrick M. Cronin and Kristine Lee, “How South Korea’s ‘New Economic Map’ Could Shift
Northeast Asia’s Balance of Power,” The Diplomat, August 10, 2018, https://thediplomat.com/2018/08/how-south-
koreas-new-economic-map-could-shift-northeast-asias-balance-of-power/
317
The Presidential Committee on the Northern Economic Cooperation, “9-Bridge Strategy.”
100

which had been postponed for the environmental assessment. To ease the tension and push for
inter-Korean dialogue, the Moon government sought to enhance cooperation with the U.S. and
China. Yet, its ongoing efforts to repair South Korea’s damaged ties with China and restore
economic cooperation came at odds with its stance on the THAAD deployment and also in the
wake of the growing tension between the U.S. and China. To avoid getting caught between the
U.S. and China, the Moon government pushed for “balanced diplomacy.” On November 3, 2017,
Moon in his interview with the Singapore-based Channel News Asia explained:
For South Korea, the alliance with the U.S. is more important anything in
safeguarding our security...The relationship with China has become more
important not only in terms of economic cooperation, but also for strategic
cooperation for the peaceful resolution of the North Korean nuclear issue.
That is why I am pursuing a balanced diplomacy with the U.S. as well as
China.
318

Four days later, Moon’s “balanced diplomacy” was put to the test when Trump asked
Moon to join the U.S.-led FOIP Strategy during their summit meeting on November 7. The
Moon government showed cautious reservation to Trump’s request because the FOIP concept
was largely perceived as the U.S. containment strategy of China.
319
Two days after his summit
with Trump, Moon announced the New Southern Policy (NSP) during his state visit to Indonesia,
saying that “Korean diplomacy in Asia has been more toward Japan, China and Russia. But I see
that it should expand to new horizons.”
320
The NSP, together with the NNP, is intended to

318
Quoted in Lee, “South Korea’s Strategic Nondecision and Sino-U.S. Competition.”
319
Jaechun Kim, “South Korea’s Free and Open Indo-Pacific Dilemma,” The Diplomat, April 27, 2018.
https://thediplomat.com/2018/05/south-koreas-free-and-open-indo-pacific-dilemma/; Also see Wooyeal Paik, Gi-tae
Lee, Jaehyun Lee, and Gu-yeon Chung, Kwodeu guggaui indo-taepyeong-yang jeonlyaggwa hangug-ui daeeung
[Quad countries' Indo-Pacific Strategy and Korea's Response] (Seoul: Asan Institute of Policy Studies, 2019).
320
Darren Whiteside, “South Korea's Moon unveils new focus on Southeast Asia,” Reuters, November 9, 2017,
https://www.reuters.com/article/us-indonesia-southkorea-idUSKBN1D90OC
101

“diversify [South Korea’s] foreign diplomacy and…external trade partners,” an ROK official
added.
321

The intensifying U.S.-China great power competition brought a change in Sino-ROK
bilateral relations. Although their disagreement remained on the THAAD issue, China and ROK
governments agreed to restore their bilateral relationship in early November 2017. When Xi and
Moon held their first summit a month later in December 2017, the two leaders agreed to resume
economic cooperation between their two countries by linking China’s BRI with South Korea’s
New North and New South Policies. At the public conference during his visit to Chongqing,
China, Moon proposed specific cooperation between these two initiatives—by linking the
transnational railroad system, pushing for joint private sector cooperation in the overseas market,
and creating a “digital silk road.”
322

Meanwhile, the Moon government’s engagement with China’s BRI became closely
associated with its inter-Korean economic cooperation agenda and peace-building process, which
was given a high priority within the Moon government. In August 2018, after Moon’s summit
meeting with North Korean leader Kim Jong-un on April 27, 2018 and based on their
Panmunjom Declaration under which they agreed to connect the railroads between two Koreas,
the Moon government announced its new policy initiative to create the East Asian Railroad
Community involving six Northeast Asian countries, including the U.S. Moon said, “This
community will extend our economic horizon into the lands to the north and will become the
principal artery of coexistence and co-prosperity in Northeast Asia. This will lead to an energy

321
Uri Friedman, “How to Choose Between the U.S. and China? It’s Not That Easy,” The Atlantic, July 26, 2019,
https://www.theatlantic.com/politics/archive/2019/07/south-korea-china-united-states-dilemma/594850/
322
“(LEAD) S. Korean leader urges increased business cooperation between S. Korea, China,” Yonhap News,
December 16, 2017, https://en.yna.co.kr/view/AEN20171216001751315
102

community and economic community in East Asia and will be the starting point for a multilateral
peace and security system in Northeast Asia.”
323

Amid South Korea’s engagement with China’s BRI, the Moon government also began to
align South Korea’s NSP with U.S. FOIP strategy. In mid-2018, U.S. and South Korean officials
began their discussion to explore ways to harmonize their two policy initiatives.
324
Some
progress was made at the 3
rd
U.S.-ROK Senior Economic Dialogue (SED) held in December
2018, where both sides agreed to enhance their cooperation in energy, women’s economic
empowerment, and healthcare security, with an understanding to expand their cooperation to
other areas such as infrastructure, development, and cybersecurity.
325
These bilateral efforts
gained an important political boost on June 30, 2019 when Moon expressed South Korea’s
support to the U.S. FOIP strategy, stating that “Under the regional cooperation principles of
openness, inclusiveness and transparency, we have agreed to put forth harmonious cooperation
between Korea's New Southern Policy and the United States' Indo-Pacific Strategy.”
326

In November 2019, the U.S. and South Korea issued a Joint Fact Sheet, highlighting their
concrete economic partnership in development, infrastructure, science & technology, digital
connectivity, energy, and smart cities.
327
But disagreements also remained in 5G, Clean
Network, and Blue Dot Network.
328
Other important issues are also left unaddressed, such as, as

323
Ji-eun Kim and Yeon-cheol Seong, “President Moon proposes Northeast Asian Railway Community Initiative,”
Hankyoreh, August 16, 2018, http://english.hani.co.kr/arti/english_edition/e_northkorea/857919.html
324
“S. Korean, U.S. diplomats discuss Washington's Indo-Pacific strategy,” Yonhap News, August 24, 2018,
https://en.yna.co.kr/view/AEN20180824012400315?section=search
325
ROK Ministry of Foreign Affairs, “3rd ROK-US Senior Economic Dialogue Takes Place,” December 8, 2018,
http://www.mofa.go.kr/eng/brd/m_5676/view.do?seq=320273&srchFr=&srchTo=&srchWord=&srchTp=&multi_it
m_seq=0&itm_seq_1=0&itm_seq_2=0&company_cd=&company_nm=&page=2&titleNm
326
Office of the President, “Opening Remarks by President Moon Jae-in at Joint Press Conference Following Korea-
U.S. Summit,” June 30, 2019, https://english1.president.go.kr/BriefingSpeeches/InterKoreanRelations/618
327
U.S. Department of State, “Joint Statement on the 4th Republic of Korea-United States Senior Economic
Dialogue,” November 6, 2019, https://2017-2021.state.gov/joint-statement-on-the-4th-republic-of-korea-united-
states-senior-economic-dialogue/index.html
328
Ibid.
103

Jaehyon Lee and Andrew Yeo each point out, the U.S.-ROK cooperation in traditional security
issue-areas and also the role of the U.S.-ROK alliance in the broader regional context in Asia.
329

South Korea’s increased cooperation with the U.S. FOIP strategy took place in tandem
with its continuous engagement with China’s BRI. But the latter made relatively small progress.
On November 15, 2018, the ROK Ministry of Foreign Affairs and the Chinese Ministry of
Commerce held a joint public-private consultation to discuss ways to cooperate on their two
initiatives.
330
In April 2019, ROK Deputy Prime Minister and Minister of Economy and Finance
Hong Nam Ki attended the second Belt and Road forum. Between March and May 2019, the
Chinese government reported twice that high-level ROK officials had expressed South Korea’s
desire to “actively participate” in the BRI.
331
The ROK Ministry of Foreign Affairs quickly
denied the Chinese government’s statements and made clear that South Korea was still searching
for “common areas” to cooperate under the two initiatives.
332
When Moon met Xi in late
December 2019, the South Korean president reaffirmed his government’s intent to cooperate
with China and build synergies between South Korea’s policy strategies and China’s BRI.
333
In
August 2020, a high-level consultation meeting was held between Chinese Communist Politburo

329
Jaehyon Lee, “Korea’s New Southern Policy: Motivations of ‘Peace Cooperation’ and Implications for the
Korean Peninsula” The Asan Institute for Policy Studies, June 21, 2019, https://en.asaninst.org/contents/koreas-new-
southern-policy-motivations-of-peace-cooperation-and-implications-for-the-korean-peninsula/ ; Andrew Yeo,
“South Korea and the Free and Open Indo-Pacific Strategy,” Center for Strategic and International Studies, July 20,
2020, https://www.csis.org/analysis/south-korea-and-free-and-open-indo-pacific-strategy
330
ROK Ministry of Foreign Affairs, “ROK and China Hold Joint Public-Private Consultation to Seek Cooperation
Projects Linking ROK’s New Northern and Southern Policies with China’s One Belt, One Road Initiative,”
November 16, 2018,
https://www.mofa.go.kr/eng/brd/m_5676/view.do?seq=320207&srchFr=&%3BsrchTo=&%3BsrchWord=V
ice&%3BsrchTp=&%3Bmulti_itm_seq=0&%3Bitm_seq_1=0&%3Bitm_seq_2=0&%3Bcomp
any_cd=&%3Bcompany_nm=&page=23&titleNm=
331
John Power, “What does South Korea think of China’s belt and road? It’s complicated,” South China Morning
Post, June 1, 2019, https://www.scmp.com/news/asia/southeast-asia/article/3012713/what-does-south-korea-think-
chinas-belt-and-road-its
332
Ibid.
333
Myo-Ja Ser, “Moon and Xi try to mend fences,” Korea JoongAng Daily, December 23, 2019,
https://koreajoongangdaily.joins.com/2019/12/23/politics/Moon-and-Xi-try-to-mend-fences/3071842.html
104

Member Yang Jiechi and National Security Advisor Suh Hoon. They discussed Xi’s state visit to
South Korea and agreed to explore pilot projects that would link their respective initiatives.
However, the sign of concrete cooperation is yet to be seen.

105

Chapter 6: Conclusion

How do countries choose sides between the U.S. and China? And what causes a variation
in such choices, especially among U.S. allies in the Asia-Pacific region? This dissertation has
argued and shown that countries make alignment decisions according to the relative interest they
prioritized, and the different relative interests pursued lead the major powers and secondary
powers to diverge in their alignment decisions. This chapter evaluates the theory and discusses
the implications of this study. Finally, this chapter concludes with the areas of future research.

Case Study Findings
This study finds that Japan, the Philippines, and Australia strongly conformed to the
theory's predictions in both cases of AIIB and BRI. Especially, different alignment decisions
made by Japan and the Philippines despite their maritime disputes with China provide strong
support to the theory that their alignment decisions fundamentally diverged because of the
different relative interests each prioritized. In the case of Japan, the country pursued strategic
interest because the perceived strategic risks far exceeded perceived economic gains. Unlike
other countries, Japan had deep strategic concern about the AIIB given Japan’s historical role
and contribution to the ADB and the political influence it had maintained within the ADB.
334
As
Ming Wan writes, “the Japan-China rivalry is felt more strongly in the ADB position.
Fundamentally, this is about power and influence. One should also keep in mind that the ADB
has played a significant role in Japan’s vision for Asian regionalism. And Japan has arguably

334
Katada, “At the Crossroads.”
106

leveraged its dominance in the ADB for greater global influence.”
335
Saori Katada thus argues
that Japan’s response toward the AIIB was driven by “defensive concerns that it needed to
maintain its position in the retreating global hierarchy.”
336
From this perspective, it may have
been natural for Japan to align with the U.S. on the AIIB issue given their shared strategic
interest. As the founders and largest shareholders of the ADB, both countries saw China-led
AIIB could undermine the ADB that has underpinned the regional economic order in Asia that
they had created and benefited from.
Japan’s response toward the BRI was also consistent with the theory, with the country
playing a much more proactive role in defending the status quo from China’s global initiative.
Specifically, Japan set up and promoted high-quality infrastructure development as an
international standard, an approach later embraced by the U.S., Australia, and India.
Additionally, the country reinforced the existing rules and norms of international development,
such as transparency, openness, inclusiveness, and fairness. Japan’s stance toward the BRI
slightly evolved over time. But as Titli Basu put it, it was “a cautious engagement with China
without compromising on international norms and principles, with the aim of making China
more adaptable to global standards and rule of law.”
337

The Philippines exemplified the secondary powers’ alignment behavior. Although the
country’s previous experience with the Chinese loan, coupled with the arbitration case it had
filed against China to settle their maritime disputes in the South China Sea, made the Aquino
government far more cautious in its approach toward the AIIB, the Philippines’ final decision

335
Ming Wan, The Asian Infrastructure Investment Bank: The Construction of Power and the Struggle for the East
Asian International Order (New York: Palgrave Macmillan, 2016), 71.
336
Katada, “At the Crossroads,” 7.
337
Titli Basu, “Japan’s Belt and Road Puzzle, Decoded,” The Diplomat, February 28, 2018,
https://thediplomat.com/2018/02/japans-belt-and-road-puzzle-decoded/
107

was consistent with the theory. Despite the fact that the country is the hosting country of the
ADB, the Philippines was not as defensive about the bank as the U.S. and Japan were and was
driven by the domestic economic imperative in its decision to join the bank. The Philippines’
alignment behavior under Duterte was also in line with the theory. Duterte’s strong preference
for engagement with China for economic gains and little strategic risk perceived from the BRI
clearly showed conventional bandwagoning for profit.
Australia was an important case given its different responses toward the AIIB and the
BRI. The Abbott government was ambivalent toward the bank at first because it perceived high
economic gains and high geostrategic risks. After the U.S. asked Australia not to join, the latter
also perceived the security risks with the U.S. Consequently, the desire to pursue economic
interest were offset by the greater strategic risks perceived, driving Australia not to join the AIIB
in line with the U.S. However, This U.S.-led alignment broke down after the European allies
broke ranks with the U.S. to participate in the bank, which seemed to have reduced Australia’s
perceived security risks with the U.S. and created room for Australia to maneuver between the
U.S. and China and pursue its economic interest. Nevertheless, this bargaining behavior was
absent in the case of BRI. As China’s global initiative directly affected Australia and the regional
influence the latter had maintained over South Pacific countries, the predominant geostrategic
risk drove the Turnbull government not to participate in the BRI—even in the absence of U.S.
pressure. Australia’s divergent alignment behavior is crucial because it shows that there is a
cross-regional variation in the geostrategic risks perceived by the major powers, and that this
variation can alter their strategic calculations and alignment choices.
South Korea is a middle power in East Asia. According to the theory, South Korea should
have joined both the AIIB and BRI in the expectation of higher economic gains. Indeed, South
108

Korea was quite receptive to these two initiatives. Like Australia, South Korea initially stayed
out but later participated in the AIIB based on economic rationale. Both the Park and Moon
governments were attracted to and engaged China’s BRI, in large part, because of economic
reasons. But South Korea has not joined the BRI after strong U.S. opposition increased the
security risks for the country. Currently, the country appears to maintain “strategic ambiguity” as
a way to stave off pressure to make alignment choices between the U.S. and China and retain
some degree of policy flexibility.
338
This seems evident from the Moon government’s
engagement of both U.S. FOIP and China’s BRI. Robert Rothstein writes, “neutrality or
nonalignment is sensible only when certain basic conditions prevail: the Small Power must not
be so potentially powerful as to threaten to shift the [power balance between the great powers] if
incorporated by one side.”
339
With South Korea geographically situated at the forefront of the
U.S.-China great power competition, there are ongoing debates within the country whether
strategic ambiguity is a viable, sustainable policy response.
340

South Korea’s complex alignment behavior seems attributable to the North Korea and
reunification issues. As shown from the Park government’s push for the NEADB and Eurasia
Initiative and Moon government’s New Economic Map of the Korean peninsula, the North
Korea issue clearly intervened in South Korea’s alignment decision-making over the AIIB and

338
On strategic ambiguity, see Lee, “South Korea's Strategic Nondecision and Sino-U.S. Competition.”; Michael J.
Green and Cheol Hee Park, “Assessing the Direction of South Korea-Japan Relations in a New Era,” Center for
Strategic and International Studies, October 6, 2020, https://www.csis.org/analysis/assessing-direction-south-korea-
japan-relations-new-era; Whan-woo Yi, “US-China row calls Korea's strategic ambiguity into question,” The Korea
Times, August 12, 2020, http://www.koreatimes.co.kr/www/nation/2020/08/120_294275.html
339
Rothstein, 32 and 246.
340
Han-kwon Kim, “‘jeonlyagjeog mohoseong’ui yutong-gihan-eun kkeutnassda (dong-a silon/gimhangwon)” [The
expiration date of ‘strategic ambiguity’ is over (Dong-A Shiron/Kim Han-Kwon)], DongA.com, June 10, 2020,
https://www.donga.com/news/Opinion/article/all/20200610/101439202/1; Su-jin Chun, “hangug, mi·jung
yangjjogseo balamdung-i nag-injjighyeo…dog pum-eun bog-eo jeonlyag-eul” [Both US and China branded South
Korea as a playboy...Need a poisonous puffer fish strategy] Korea JoongAng Daily, June 2, 2020,
https://news.joins.com/article/23790075
109

BRI. This suggests that unlike in other countries, North Korea could become a critical variable
that can significantly shape South Korea’s alignment behavior in the context of U.S.-China great
power competition. After all, while the country relies on the U.S. for security and China for
economic prosperity, China’s influence on North Korea provides the impetus for South Korea to
enhance strategic cooperation with China to resolve North Korea denuclearization and Korean
reunification issues. Arguably, this is a constraint that poses a unique challenge for South Korea
and may explain why the country has strived to seek a balanced relationship between the U.S.
and China.
It is important to discuss whether some of the countries’ ongoing maritime dispute with
China had any impact on their alignment behavior. The comparative case studies of Japan and
the Philippines showed that while their current disputes with China in the East and South China
Seas certainly deepened their concern about China’s unilateral move to alter the status quo in the
maritime domain, these disputes did not determine their alignment decision-making over the
AIIB and BRI. Rather, it was based on their rational calculations of their competing economic
and strategic interests that set Japan and the Philippines on a different path. Put it differently, fear
of losing its high political stake in the existing order and regional influence drove Japan to
defend the status quo in both economic and security spheres while greed drove the Philippines to
separate the AIIB and BRI issues from the maritime dispute to pursue economic gains.

The Implications
Understanding state alignment behavior is crucial in the current academic and policy
discourse. This study builds on and moves beyond Randell Schweller’s balance of interest theory
to explain how countries make their alignment choices in the context of U.S.-China great power
110

competition. Specifically, this study departs from the previous research that tends to look at the
divide between the status quo states and revisionist states. Instead, it shows that a different
degree of status quo satisfaction amongst the status quo states can also generate different
alignment decisions, especially between the major powers and secondary powers. By testing the
theory against the four U.S. allies in the Asia-Pacific region, this research demonstrates that
different economic conditions and varied status quo satisfaction can drive the major powers and
secondary powers to pursue different national interest, leading them to diverge in their alignment
choices in the context of the US-China great power competition. Doing so helps to fill in the gap
in the power transition literature by bringing to light the secondary powers’ distinctive
motivation and behavior in times of power transitions.
As the U.S.-China strategic competition continues to deepen, this research has important
implications for U.S. policymakers. Specifically, as the U.S. seeks to work closely with its allies
to confront China, understanding what causes different alignment behavior among U.S. allies is
critical in developing an effective U.S. grand strategy in Asia-Pacific. To that end, this study can
assist the U.S. policymakers to better understand why and how four U.S. allies diverged in their
responses to China’s economic initiatives. To be clear, none of these allies attempted to shift
their security alignments with the U.S. Both the AIIB and BRI were concerned with strategic
alignments concerning the status quo in the economic domain, revealing their different priorities
and incentives. And this research suggests that when compared to secondary power allies, major
power allies are more likely to support Washington’s China strategy because of their congruent
interest in preserving the status quo and protect their regional influence. As a result, U.S.
policymakers should consider developing a more sophisticated alliance management strategy
tailored to individual allies’ diverse incentives, unique constraints, and vulnerabilities. Any
111

approach to simply force U.S. allies to support the U.S. against China may prove ineffective and
could create a collective action problem for the U.S. that could undermine its leadership in Asia.

Areas of Future Research
Many parts of this study still need further improvement and refinement. Given that the
U.S.-China great power competition is an ongoing event, one can begin by examining other
similar or historical cases or by exploring the applicability of this theory. In addition, widening
the scope conditions could also help improve the theory. In what follows, I discuss three areas of
future research.

Quad
The balance of relative interest theory is primarily concerned with state alignment
behavior in the economic domain. This naturally raises an important question about whether and
how this theory can be extended to explain state alignment behavior in other issue-arenas,
especially in security and military domains where existing theories already offer strong
explanation and predictability. For that reason, the Quad may be a good starting point for future
research.
The Quad was created in 2007 based on a proposal by then-Japanese prime minister
Shinzo Abe. But its initial grouping joined by the U.S., Japan, Australia, and India fell apart in
2009 after Australia withdrew from it. In his memoir, then-Australian prime minister Kevin
Rudd explains why his government decided to pull out from the Quad:

Our concerns were straightforward: why would Australia want to consign the
future of its bilateral relationship with China to the future health of the China–
Japan relationship, where there were centuries of mutual toxicity? For Australia to
112

embroil itself in an emerging military alliance with Japan against China, which is
what the quad in reality was, in our judgment was incompatible with our national
interests. Then there was China’s historical relationship with India….So did
Australia want to anchor our future relationship with Beijing with new ‘allies’
which had deep historical disputes still to resolve with China? If the ‘quad’
became formalised, where would that place Australia if we then had to take sides
in Delhi’s or Tokyo’s multiple unresolved disputes with Beijing? A further danger
we faced was, if Australia proceeded with the quad, what would happen if
domestic political circumstances later changed in either Japan or India?
Governments could change through elections. Even the policies of existing
governments could change. Australia would run the risk of being left high and dry
as a result of future policy departures in Tokyo or Delhi. Indeed, that remains a
danger through to this day.
341

However, the Quad was revived recently, with the first Quad summit held in March 2021.
Quad partners made clear that the new Quad 2.0 dialogue is not an “Asian NATO” aimed at
containing China but a new multilateral dialogue to enhance their strategic cooperation including
but not limited to non-security areas, such as vaccine, climate change, emerging technologies.
342

What caused Japan, Australia, India, and the U.S. to revive the Quad 2.0 dialogue despite the risk
of antagonizing their key economic partner, China? Especially, what changed in Australia to
decide to return to the Quad? Lastly, why is there a variation in the way the major powers and
secondary powers respond differently to the status quo change in the economic domains and
security domains? Addressing a set of these questions will help broaden the scope of this
research and help build a better theory of state alignment behavior in the context of U.S.-China
strategic rivalry.

341
Kevin Rudd, The PM Years (Australia: Pan Macmillan, 2018) Chap. 3, Kindle.
342
White House, “Remarks by President Biden, Prime Minister Modi of India, Prime Minister Morrison of
Australia, and Prime Minister Suga of Japan in the Virtual Quad Leaders Summit,” March 12, 2021,
https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/03/12/remarks-by-president-biden-prime-
minister-modi-of-india-prime-minister-morrison-of-australia-and-prime-minister-suga-of-japan-in-virtual-meeting-
of-the-quad/
113

Geographical Scope
The balance of relative interest theory was tested against U.S. allies in the Asia-Pacific
region. But they are certainly not the only ones entrapped in the U.S.-China great power
competition. Moreover, the Australian case showed that the major powers’ perceived
geostrategic risk could vary depending on the geographical scope of the Chinese initiative.
Hence, it is necessary and important to test the theory more broadly to enhance its
generalizability.
Testing the theory against the U.S. NATO allies seems ideal. Indeed, the alignment
behavior of some NATO allies seems quite comparable to Australia’s. For instance, major
powers allies like Germany, France, and the UK have not joined the BRI contrary to their
participation in the AIIB. But many secondary powers in the region have joined both initiatives.
This variation between the major power allies and secondary power allies seems strongly
consistent with the predictions of the theory. However, conducting in-depth case studies will be
required to verify whether this regional variation in their alignment behavior is due to the change
in the perceived geostrategic risks by the major powers.

Temporal Scope
Another important area of future studies is to revisit historical cases and study how
countries responded to the rise of great power competition in the past. Take the pre-WWI era in
Europe, where many of the countries were economically integrated with each other. In Foreign
Policy, Keith Johnson and Robbie Gramer write, “The threat of a great decoupling is a
potentially historic break, an interruption perhaps only comparable to the sudden sundering of
the first huge wave of globalization in 1914, when deeply intertwined economies such as Britain
114

and Germany, and later the United States, threw themselves into a barrage of self-destruction and
economic nationalism that didn’t stop for 30 years.”
343
How did the leaders and policymakers
think about the growing economic (inter)dependence on their potential rivals at that time? Were
there any strategic discussions or efforts to reduce their economic (inter)dependence, if not
economic decoupling, as the tension began to rise among the European countries? Another
possible avenue of research is historical Asia. As David Kang’s recent work shows, historical
Asia operated under a notably different system short of the balance of power dynamics observed
in Europe.
344
Will this have any bearing on the contemporary international relations in East
Asia? One may look at the Chosun Dynasty’s dilemma in the Ming-Qing power transition period
to draw some insight. Finally, future work should also investigate the non-alignment movement
in the 1950s that emerged in response to the rise of the Cold War.
In conclusion, the rise of U.S.-China great power competition calls for an improved
understanding of state alignment behavior. This dissertation argues that countries make their
alignment decisions according to the relative interest they prioritize. For the major powers, fear
of losing their stakes in the existing order and regional influence drive them to prioritize their
strategic interest and align with the United States to preserve the status quo. By contrast, greed
drives the secondary powers to prioritize their economic interest and align with China for
tangible economic benefits.

343
Keith Johnson and Robbie Gramer,“The Great Decoupling,” Foreign Policy, May 14, 2020,
https://foreignpolicy.com/2020/05/14/china-us-pandemic-economy-tensions-trump-coronavirus-covid-new-cold-
war-economics-the-great-decoupling/
344
David C. Kang, “International Order in Historical East Asia: Tribute and Hierarchy Beyond Sinocentrism and
Eurocentrism,” International Organization 74, no. 1 (Winter 2020): 65-93.
115

BIBLIOGRAPHY

Introduction, Literature Review, and Theory Chapters

Armijo, Leslie Elliott, and Saori N. Katada. “Theorizing the Financial Statecraft of Emerging
Powers.” New Political Economy 20, no. 1 (2015): 42–62.
Baldwin, David A. Economic Statecraft. Princeton, N.J: Princeton University Press, 1985.
Barnett, Michael N., and Jack S. Levy. “Domestic Sources of Alliances and Alignments: The
Case of Egypt, 1962–73.” International Organization 45, no. 3 (1991): 369–95.
Blackwill, Robert D., and Jennifer M. Harris. War by Other Means: Geoeconomics and
Statecraft. Cambridge: Harvard University Press, 2016.
Blinken, Antony. “Secretary of State Antony Blinken on the Threat Posed by China.”
Interviewed by Norah O’Donnell. 60 Minutes, CBS News, May 2, 2021.
https://www.cbsnews.com/news/antony-blinken-60-minutes-2021-05-02/.
Cha, Victor D. Alignment despite Antagonism: The United States-Korea-Japan Security
Triangle. Stanford, California: Stanford University Press, 1999.
———. “Leading by Example: Two Different Responses to China’s Rise.” The Lowy Institute,
November 11, 2020. https://www.lowyinstitute.org/the-interpreter/leading-example-two-
different-responses-chinas-rise.
Christensen, Thomas J. “Fostering Stability or Creating a Monster? The Rise of China and U.S.
Policy toward East Asia.” International Security 31, no. 1 (2006): 81–126.
David, Steven R. “Explaining Third World Alignment.” World Politics 43, no. 2 (1991): 233–56.
Department of the Prime Minister and Cabinet. “Malcolm Turnbull’s Press Conference at the
Launch of the Government’s Foreign Policy White Paper.” November 23, 2017.
https://pmtranscripts.pmc.gov.au/release/transcript-41345.
“Duterte Says Philippines Won’t Take Sides as US and China Tussle.” Nikkei Asia, May 21,
2021. https://asia.nikkei.com/Spotlight/The-Future-of-Asia/The-Future-of-Asia-
2021/Duterte-says-Philippines-won-t-take-sides-as-US-and-China-tussle.
Farrell, Henry, and Abraham L. Newman. “Weaponized Interdependence: How Global
Economic Networks Shape State Coercion.” International Security 44, no. 1 (2019): 42–
79.
Garnaut, John. “‘Fear and Greed’ Drive Australia’s China Policy, Tony Abbott Tells Angela
Merkel.” The Sydney Morning Herald, April 16, 2015.
https://www.smh.com.au/politics/federal/fear-and-greed-drive-australias-china-policy-
tony-abbott-tells-angela-merkel-20150416-1mmdty.html.
Glaser, Bonnie. “The Choice for Southeast Asia Isn’t between the United States and China.” The
Straits Times, June 17, 2019. https://www.straitstimes.com/opinion/the-choice-for-s-e-
asia-isnt-between-the-us-and-china.
Goh, Evelyn. “Meeting the China Challenge: The U.S. in Southeast Asian Regional Security
Strategies.” Policy Studies, no. 16 (2005): 1-66.
Han, Enze. “Under the Shadow of China-US Competition: Myanmar and Thailand’s Alignment
Choices.” The Chinese Journal of International Politics 11, no. 1 (2018): 81–104.
Handel, Michael. “Weak States in the International System.” In Small States in International
Relations, edited by Christine Ingebritsen et al., 171. Seattle: University of Washington
Press, 2006.
116

Hirschman, Albert O. National Power and the Structure of Foreign Trade. Berkeley: University
of California Press, 1945.
Ikenberry, John G. “Between the Eagle and the Dragon: America, China, and Middle State
Strategies in East Asia.” Political Science Quarterly 131, no. 1 (2016): 9–43.
Ingebritsen, Christine, Iver Neumann, Sieglinde Gstöhl, and Jessica Beyer, eds. Small States in
International Relations. Seattle: University of Washington Press, 2006.
Jackson, Van. “Power, Trust, and Network Complexity: Three Logics of Hedging in Asian
Security.” International Relations of the Asia-Pacific 14, no. 3 (2014): 331–56.
Johnston, Alastair Iain. “Is China a Status Quo Power?” International Security 27, no. 4 (2003):
5–56.
Kang, David C. American Grand Strategy and East Asian Security in the Twenty-First Century.
New York: Cambridge University Press, 2017.
———. China Rising: Peace, Power, and Order in East Asia. New York: Columbia University
Press, 2007.
Kendall-Taylor, Andrea, and Rachel Rizzo. “The U.S. or China? Europe Needs to Pick a Side.”
Politico, August 12, 2019.
https://www.politico.com/magazine/story/2019/08/12/us-china-europe-relations-227614.
Kim, Woosang. “Rising China, Pivotal Middle Power South Korea, and Alliance Transition
Theory.” International Area Studies Review 18, no. 3 (2015): 251–65.
Kuik, Cheng-Chwee. “The Essence of Hedging: Malaysia and Singapore’s Response to a Rising
China.” Contemporary Southeast Asia 30, no. 2 (2008): 159–85.
Lake, David A. Hierarchy in International Relations. Ithaca, N.Y: Cornell University Press,
2009.
Lee, Hsien Loong. “The Endangered Asian Century.” Foreign Affairs, December 18, 2020.
https://www.foreignaffairs.com/articles/asia/2020-06-04/lee-hsien-loong-endangered-
asian-century.
Lemke, Douglas. Regions of War and Peace. New York: Cambridge University Press, 2002.
Liff, Adam P., and G. John Ikenberry. “Racing toward Tragedy? China’s Rise, Military
Competition in the Asia Pacific, and the Security Dilemma.” International Security 39,
no. 2 (2014): 52–91.
Lim, Darren J., and Zack Cooper. “Reassessing Hedging: The Logic of Alignment in East Asia.”
Security Studies 24, no. 4 (2015): 696–727.
Liska, George. Nations in Alliance: The Limits of Interdependence. Baltimore: Johns Hopkins
Press, 1962.
Medeiros, Evan S. “Strategic Hedging and the Future of Asia-Pacific Stability.” The Washington
Quarterly 29, no. 1 (2005): 145–67.
Norris, William J. Chinese Economic Statecraft: Commercial Actors, Grand Strategy, and State
Control. Ithaca, N.Y: Cornell University Press, 2016.
Organski, A. F. K. World Politics. New York: Alfred A. Knopf, 1958.
Organski, A. F. K., and Jacek Kugler. The War Ledger. Chicago: University of Chicago Press,
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Balancing in East Asia.” Security Studies 15, no. 3 (2006): 355–95.
———. “On the Fungibility of Economic Power: China’s Economic Rise and the East Asian
Security Order.” European Journal of International Relations 25, no. 1 (2019): 302–27.
Rothstein, Robert L. Alliances and Small Powers. New York: Columbia University Press, 1968.
117

Roy, Denny. “Southeast Asia and China: Balancing or Bandwagoning?” Contemporary
Southeast Asia 27, no. 2 (2005): 305–22.
Schweller, Randall L. “Bandwagoning for Profit: Bringing the Revisionist State Back In.”
International Security 19, no. 1 (1994): 72–107.
Simon, Michael W., and Erik Gartzke. “Political System Similarity and the Choice of Allies: Do
Democracies Flock Together, or Do Opposites Attract?” The Journal of Conflict
Resolution 40, no. 4 (1996): 617–35.
Siverson, Randolph M., and Juliann Emmons. “Birds of a Feather: Democratic Political Systems
and Alliance Choices in the Twentieth Century.” The Journal of Conflict Resolution 35,
no. 2 (1991): 285–306.
Snyder, Glenn H. “Alliance Theory: A Neorealist First Cut.” Journal of International Affairs 44,
no. 1 (Spring/Summer 1990): 103–23.
———. Alliance Politics. Cornell Studies in Security Affairs. Ithaca, N.Y: Cornell University
Press, 1997.
Stromseth, Jonathan. Don’t Make Us Choose: Southeast Asia in the Throes of US-China Rivalry.
(Washington, DC: The Brookings Institution, 2019)
https://www.brookings.edu/research/dont-make-us-choose-southeast-asia-in-the-throes-
of-us-china-rivalry/.
Tammen, Ronald L., Jacek Kugler, Douglas Lemke, Allan C. Stam III, Mark Andrew
Abdollahian, Carole Alsharabati, Brian Efird, and A.F.K. Organski. Power Transitions:
Strategies for the 21st Century. New York: Chatham House Publishers, 2000.
Tessman, Brock F. “System Structure and State Strategy: Adding Hedging to the Menu.”
Security Studies 21, no. 2 (2012): 192–231.
Walt, Stephen M. “Testing Theories of Alliance Formation: The Case of Southwest Asia.”
International Organization 42, no. 2 (1988): 275–316.
———. The Origins of Alliances. Ithaca: Cornell University Press, 1987.
Ward, Michael D. Research Gaps in Alliance Dynamics. Denver: University of Denver, 1982.
Williams, Kristen P., Steven E. Lobell, and Neal G. Jesse, eds. Beyond Great Powers and
Hegemons: Why Secondary States Support, Follow, or Challenge. Stanford, California:
Stanford University Press, 2012.
Wong, Catherine. “Singapore Leader Warns Region May Have to Choose between China and
US.” South China Morning Post, November 15, 2018.
https://www.scmp.com/news/china/diplomacy/article/2173479/singapore-leader-lee-
hsien-loong-warns-region-may-have-choose.

Case Study Chapter

Asian Development Bank and Asian Development Bank Institute. Infrastructure for a Seamless
Asia. Tokyo: Asian Development Bank Institute, 2009.
https://www.adb.org/sites/default/files/publication/159348/adbi-infrastructure-seamless-
asia.pdf.
Jiao, Wu. “President Xi gives speech to Indonesia’s Parliament.” Chinadaily, October 2, 2013.
https://www.chinadaily.com.cn/china/2013xiapec/2013-10/02/content_17007915_2.htm.
Ministry of Foreign Affairs, People’s Republic of China. “Connectivity Spearheads
Development and Partnership Enables Cooperation.” November 8, 2014.
118

https://www.fmprc.gov.cn/mfa_eng/topics_665678/ytjhzzdrsrcldrfzshyjxghd/t1210466.sh
tml.
———. “President Xi Jinping Delivers Important Speech and Proposes to Build a Silk Road
Economic Belt with Central Asian Countries.” September 7, 2013.
https://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpfwzysiesgjtfhshzzfh_665686/t107
6334.shtml.
Prasad, Eswar S. Gaining Currency: The Rise of the Renminbi. New York: Oxford University
Press, 2017.
Sacks, David. “Countries in China’s Belt and Road Initiative: Who’s In And Who’s Out.”
Council on Foreign Relations, March 24, 2021. https://www.cfr.org/blog/countries-
chinas-belt-and-road-initiative-whos-and-whos-out.

Japan

“Abe’s Ruling Party Calls for Cautious Approach to AIIB.” Japan Times, June 4, 2015.
https://www.japantimes.co.jp/news/2015/06/04/business/abes-ruling-party-calls-cautious-
approach-aiib/.
“ADB Chief Sees Possible Joint Financing with China-Led AIIB.” Nikkei Asia, March 26, 2015.
https://asia-nikkei-com.libproxy2.usc.edu/Business/Finance/ADB-chief-sees-possible-
joint-financing-with-China-led-AIIB.
“Ball Is in Tokyo’s Court, Business Chief Says.” Nikkei Asia, March 23, 2015. https://asia-
nikkei-com.libproxy2.usc.edu/Politics/Ball-is-in-Tokyo-s-court-business-chief-says.
“China Premier Li Keqiang Urges Japan to Join ‘Silk Road’ Infrastructure Project.” Kyodo
News, May 10, 2018. https://english.kyodonews.net/news/2018/05/0fecd65df6d8-china-
premier-urges-japan-to-join-silk-road-infrastructure-project.html.
“Chinese Bank Proposal Finds Support within Abe’s Party.” Nikkei Asia, April 2, 2015.
https://asia.nikkei.com/Politics/Chinese-bank-proposal-finds-support-within-Abe-s-party.
Coorey, Phillip, and Greg Earl. “Tony Abbott Held Talks with Shinzo Abe before Decision on
China Bank.” Australian Financial Review, November 1, 2014.
https://www.afr.com/world/asia/tony-abbott-held-talks-with-shinzo-abe-before-decision-
on-china-bank-20141101-11fasc.
Ennis, Peter. “Why Japan Still Matters.” The Brookings Institution, May 10, 2011.
https://www.brookings.edu/research/why-japan-still-matters/.
Fackler, Martin. “Japan, Sticking With U.S., Says It Won’t Join China-Led Bank.” New York
Times, March 31, 2015. https://www.nytimes.com/2015/04/01/world/asia/japan-says-no-
to-asian-infrastructure-investment-bank.html.
Gan, Nectar, and Robert Delaney. “United States under Donald Trump Is Veering Away from
China’s Belt and Road.” South China Morning Post, April 25, 2019.
https://www.scmp.com/news/china/article/3007504/united-states-under-trump-veering-
away-chinas-belt-and-road.
Green, Michael J. Japan’s Reluctant Realism. New York: Palgrave Macmillan, 2003.
Hayashi, Saki, and Yosuke Onchi. “Japan to Propose Dialogue with US, India and Australia.”
Nikkei Asia, October 26, 2017. https://asia.nikkei.com/Politics/Japan-to-propose-
dialogue-with-US-India-and-Australia2.
119

Ito, Asei. “China’s Belt and Road Initiative and Japan’s Response: From Non-Participation to
Conditional Engagement.” East Asia 36, no. 2 (2019): 115–28.
“Japan Ministry Sees Limited Merit of Participation.” Nikkei Asia, May 12, 2015. https://asia-
nikkei-com.libproxy2.usc.edu/Economy/Japan-ministry-sees-limited-merit-of-
participation.
“Japan Reluctant to Join China-Led Investment Bank.” Japan Times, July 5, 2014.
https://www.japantimes.co.jp/news/2014/07/05/national/politics-diplomacy/japan-
reluctant-join-china-led-investment-bank/.
Japanese Ministry of Economy, Trade and Industry. “Announcement of Partnership for Quality
Infrastructure.” May 21, 2015. https://www.meti.go.jp/english/press/2015/0521_01.html.
———. “Japan and China Conclude Memorandum on Business Cooperation in Third
Countries,” May 10, 2018. https://www.meti.go.jp/english/press/2018/0510_003.html.
———. “The ‘Expanded Partnership for Quality Infrastructure’ Initiative Directed toward the
G7 Ise-Shima Summit Meeting Announced.” May 23, 2016.
https://www.meti.go.jp/english/press/2016/0523_01.html.
———. “52 MOCs Signed in Line with Convening of First Japan-China Forum on Third
Country Business Cooperation,” October 26, 2018.
https://www.meti.go.jp/english/press/2018/1026_003.html.
Japanese Ministry of Foreign Affairs. “Cabinet Decision on the Development Cooperation
Charter.” February 10, 2015. https://www.mofa.go.jp/policy/oda/page_000138.html.
———. “Press Conference by Foreign Minister Fumio Kishida.” September 2, 2014.
https://www.mofa.go.jp/press/kaiken/kaiken4e_000097.html.
———. “Press Conference by Foreign Minister Fumio Kishida,” March 31, 2015.
https://www.mofa.go.jp/press/kaiken/kaiken4e_000156.html.
———. “White Paper on Development Cooperation / Japan’s ODA White Paper.”
https://www.mofa.go.jp/policy/oda/page_000017.html.
Kajimoto, Tetsushi. “Japan Says Could Join China-Backed AIIB If Conditions Met.” Reuters,
March 19, 2015. https://www.reuters.com/article/cbusiness-us-asia-aiib-japan-
idCAKBN0MG07Y20150320.
Kajimoto, Tetsushi, and Takashi Umekawa. “Japan Says Not Bound by Deadline to Join AIIB,
and Not yet Decided.” Reuters, March 31, 2015. https://www.reuters.com/article/us-asia-
aiib-japan-idUSKBN0MR11320150331.
Katada, Saori N. “At the Crossroads: The TPP, AIIB, and Japan’s Foreign Economic Strategy.”
AsiaPacific Issues, no 125 (Honolulu: East West Center, 2016).
Lange, Jason, and Douwe Miedema. “U.S. Urges Allies to Think Hard before Joining Asia
Development Bank.” Reuters, March 17, 2015. https://www.reuters.com/article/us-
europe-asia-bank-washington-idUSKBN0MD1WS20150317.
Ministry of Foreign Affairs, People’s Republic of China. “Foreign Ministry Spokesperson Hong
Lei’s Regular Press Conference.” March 17, 2015.
https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t124636
1.shtml.
———. “Xi Jinping Meets with Prime Minister Shinzo Abe of Japan.” November 11, 2017.
https://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpcxdeswjapcebdynlwjxgsfw/t15102
93.shtml.
OECD Data on Infrastructure Investment.
120

Okano-Heijmans, Maaike, and Tomoki Kamo. “Engaging but Not Endorsing China’s Belt and
Road Initiative.” Clingendael (May 2019): 1-5.
https://www.clingendael.org/sites/default/files/2019-
05/PB_China_Belt_and_Road_Initiative_May_2019.pdf.
Perlez, Jane. “China Creates a World Bank of Its Own, and the U.S. Balks.” New York Times,
December 4, 2015. https://www.nytimes.com/2015/12/05/business/international/china-
creates-an-asian-bank-as-the-us-stands-aloof.html.
Pew Research Center. “U.S. Favorability Sees One of Its Steepest Recoveries in Years from
2020 to 2021.” June 9, 2021.
https://www.pewresearch.org/global/2021/06/10/americas-image-abroad-rebounds-with-
transition-from-trump-to-biden/.
Prime Minister’s Office of Japan. “Policy Speech by Prime Minister Shinzo Abe to the 183rd
Session of the Diet.” February 28, 2013.
https://japan.kantei.go.jp/96_abe/statement/201302/28siseuhousin_e.html.
———. “Press Conference by the Chief Cabinet Secretary.” June 6, 2017.
https://japan.kantei.go.jp/tyoukanpress/201706/6_a.html.
———. “Speech by Prime Minister Shinzo Abe at the Banquet of the 23rd International
Conference on The Future of Asia.” June 5, 2017.
https://japan.kantei.go.jp/97_abe/statement/201706/1222768_11579.html.
———. “Welcome Reception for the Third Japan-China Business Leader and Former High-
Level Government Official Dialogue (Japan-China CEO Summit).” December 4, 2017.
https://japan.kantei.go.jp/98_abe/actions/201712/4article4.html.
Sadayuki, Sakakibara. “Chairman Sakakibara’s Statements and Comments at His Press
Conference.” Keidanren, December 18, 2017.
http://www.keidanren.or.jp/en/speech/kaiken/2017/1218.html#p5.
Smith, Sheila A. Intimate Rivals: Japanese Domestic Politics and a Rising China. New York:
Columbia University Press, 2015.
“State Department Daily Briefing.” C-SPAN, July 8, 2014.
https://www.c-span.org/video/?320337-1/state-department-briefing.
Stockholm International Peace Research Institute. SIPRI Military Expenditure Database.
https://www.sipri.org/databases/milex.
Takahashi, Maiko. “Japan Estimates Potential AIIB Membership Would Cost $3 Billion.”
Bloomberg, April 13, 2015. https://www.bloomberg.com/news/articles/2015-04-
14/japan-estimates-potential-aiib-membership-would-cost-3-billion-i8gua3bi.
“Three Major Nations Absent as China Launches W.Bank Rival in Asia.” Reuters, October 24,
2014. https://www.reuters.com/article/china-aiib-idINKCN0ID09520141024.
Tillerson, Rex. “Defining Our Relationship with India for the Next Century: An Address by U.S.
Secretary of State Rex Tillerson,” Center for Strategic and International Studies, October
18, 2017. https://www.csis.org/analysis/defining-our-relationship-india-next-century-
address-us-secretary-state-rex-tillerson.
“Tokyo to Hold off on Committing to China-Led AIIB.” Nikkei Asia, March 26, 2015.
https://asia.nikkei.com/Business/Finance/Tokyo-to-hold-off-on-committing-to-China-led-
AIIB.
U.S. Department of State. “Blue Dot Network: Frequently Asked Questions.” December 14,
2020. https://www.state.gov/blue-dot-network-frequently-asked-questions/.
121

“U.S. Questions Japan about Stance on China-Led Bank.” Japan Times, April 11, 2015.
https://www.japantimes.co.jp/news/2015/04/11/national/politics-diplomacy/u-s-
questions-japan-about-stance-on-china-led-bank/#.XRHqGC-ZNvw.
Watt, Nicholas, Paul Lewis, and Tania Branigan. “US Anger at Britain Joining Chinese-Led
Investment Bank AIIB.” The Guardian, March 12, 2015.
https://www.theguardian.com/us-news/2015/mar/13/white-house-pointedly-asks-uk-to-
use-its-voice-as-part-of-chinese-led-bank.
White House. “President Donald J. Trump’s Summit Meeting with Prime Minister Shinzo Abe
of Japan.” November 6, 2017. https://trumpwhitehouse.archives.gov/briefings-
statements/president-donald-j-trumps-summit-meeting-prime-minister-shinzo-abe-japan/.
———. “Remarks by President Obama and Prime Minister Abe of Japan in Joint Press
Conference.” April 28, 2015. https://obamawhitehouse.archives.gov/the-press-
office/2015/04/28/remarks-president-obama-and-prime-minister-abe-japan-joint-press-
confere.
———. “Remarks by President Trump at APEC CEO Summit.” November 10, 2017.
https://vn.usembassy.gov/20171110-remarks-president-trump-apec-ceo-summit/.
———. “Remarks by President Trump and Prime Minister Abe of Japan in Joint Press
Conference | Tokyo, Japan.” November 6, 2017.
https://trumpwhitehouse.archives.gov/briefings-statements/remarks-president-trump-
prime-minister-abe-japan-joint-press-conference-tokyo-japan/.
———. “President Donald J. Trump’s Summit Meeting with Prime Minister Shinzo Abe of
Japan.” November 6, 2017. https://trumpwhitehouse.archives.gov/briefings-
statements/president-donald-j-trumps-summit-meeting-prime-minister-shinzo-abe-japan/.
———. “U.S.-Japan Joint Statement: The United States and Japan: Shaping the Future of the
Asia-Pacific and Beyond.” April 25, 2014. https://obamawhitehouse.archives.gov/the-
press-office/2014/04/25/us-japan-joint-statement-united-states-and-japan-shaping-future-
asia-pac.
World Integrated Trade Solution (WITS). Export/Import Partner Share.
https://wits.worldbank.org/Default.aspx?lang=en.
Zaun, Todd. “A Growing China Becomes Japan’s Top Trade Partner.” New York Times, January
27, 2005. https://www.nytimes.com/2005/01/27/business/worldbusiness/a-growing-
china-becomes-japans-top-trade-partner.html.

Philippines

Aguilar, Krissy. “Palace: Duterte’s Stance on Arbitral Ruling vs China ‘Consistent.’”
Inquirer.net, September 23, 2020. https://globalnation.inquirer.net/191127/palace-
dutertes-stance-on-arbitral-ruling-vs-china-consistent#ixzz6ujAkWQoP.
“Aquino: PH Still Mulling AIIB Invitation.” Rappler, June 3, 2015.
https://www.rappler.com/business/industries/infrastructure/95182-aquino-aiib-china-ph.
Aquino III, Benigno S. “President Aquino at the 2015 FOCAP Presidential Forum.” Official
Gazette, October 27, 2015. https://www.officialgazette.gov.ph/2015/10/27/2015-focap-
presidential-forum/.
122

———. “Speech of President Aquino at the Philippine Investment Forum in Tokyo.” Official
Gazette, June 4, 2015. https://www.officialgazette.gov.ph/2015/06/04/speech-president-
aquino-philippine-investment-forum-tokyo/.
Asian Development Bank. Meeting Asia’s Infrastructure Needs. Manila: Asian Development
Bank, 2017. https://www.adb.org/sites/default/files/publication/227496/special-report-
infrastructure.pdf.
Cabato, Regine, and Shibani Mahtani. “Pompeo Promises Intervention If Philippines Is Attacked
in South China Sea amid Rising Chinese Militarization.” Washington Post, February 28,
2019. https://www.washingtonpost.com/world/pompeo-promises-intervention-if-
philippines-is-attacked-in-south-china-sea-amid-rising-chinese-
militarization/2019/02/28/5288768a-3b53-11e9-b10b-f05a22e75865_story.html.
Castro, Renato Cruz De. “Developing a Credible Defense Posture for the Philippines: From the
Aquino to the Duterte Administrations.” Asian Politics & Policy 9, no. 4 (2017): 541–63.
Cheng, Willard. “Philippines Still Studying Whether to Join China-Led AIIB.” ABS-CBN News,
June 3, 2015. https://news.abs-cbn.com/business/06/03/15/philippines-still-studying-
whether-join-china-led-aiib.
Davis, Julie Hirschfeld. “Trump Lauds ‘Great Relationship’ With Duterte in Manila.” New York
Times, November 13, 2017. https://www.nytimes.com/2017/11/13/world/asia/trump-
duterte-philippines.html.
Department of Finance, Republic of the Philippines. “Philippines Joins Asian Infrastructure
Investment Bank.” December 30, 2015. https://www.dof.gov.ph/philippines-joins-asian-
infrastructure-investment-bank/.
Department of Foreign Affairs, Republic of the Philippines. “Philippine-United States Bilateral
Relations Fact Sheet.” Accessed July 17, 2020. https://dfa.gov.ph/dfa-news/dfa-
releasesupdate/2695-philippine-united-states-bilateral-relations-fact-sheet.
“Duterte Invokes Military Pact with US amid South China Sea Dispute.” CNN Philippines, July
17, 2019. https://cnnphilippines.com/news/2019/7/17/Duterte-Philippines-US-Mutual-
Defense-Treaty-South-China-Sea.html.
“Duterte: PH to Have Independent Foreign Policy.” ABS-CBN News, September 10, 2016.
https://news.abs-cbn.com/news/09/09/16/duterte-ph-to-have-independent-foreign-policy.
Duterte, Rodrigo Roa. “Rodrigo Roa Duterte, Second State of the Nation Address.” Official
Gazette, July 24, 2017. https://www.officialgazette.gov.ph/2017/07/24/rodrigo-roa-
duterte-second-state-of-the-nation-address-july-24-2017/.
Embassy of the People’s Republic of China in the Republic of the Philippines. “Joint Statement
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Fernandez, Butch. “PHL ‘in No Rush’ to Join China-Led Asian Infrastructure Investment Bank.”
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“FULL TEXT: President Duterte’s Speech at the 75th UN General Assembly.” Rappler,
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134

APPENDICES
Appendix A: Country-Level Economic and Security Hierarchy Indices

Figure 6: Dyadic Trade Index in 2000-2019

Source: UN Comtrade Database

135

Figure 7: Dyadic FDI Index in 2000-2019

Sources: IMF CDIS and UN Comtrade Database

136

Figure 8: Dyadic Arms Transfer Index in 2000-2019

Source: SIPRI Arms Transfers Database

137

Figure 9: Dyadic Troop Access Index in 2000-2019

Sources: David Vine’s U.S. base database and U.S. base structural reports;
“Chinese Military Diplomacy, 2003-2016: Trends and Implications” by Kenneth Allen et al.;
CSIS ChinaPower Project

138

Appendix B: Data Collection and Consolidation

FDI Index
Constructing the FDI Index required caution and a set of rules to be applied uniformly.
This is because there is a considerable gap in FDI stocks reported by a recipient economy and a
counterpart economy. For instance, South Korea’s reported inward FDI from the United States in
2016 is US $31,778 million compared to US $38,493 million reported by the U.S. for its outward
FDI in South Korea in the same year. Another reason is because China does not release its
official FDI statistics. So, the only way to obtain Chinese outward FDI statistics is to use FDI
statistics reported by the recipient economies. Because of these two issues, this paper
consistently uses the middle states’ reporting of their inward FDI from the U.S. and China.

FDI Index Data collection and consolidation
Compiling inward FDI stocks data in 2000-2019 required meticulous data collection and
consolidation because there is no single FDI database that comprehensively covers that specific
time period. For example, IMF CDIS covers between 2009 and 2019, OCED (3rd edition) for
2000-2012, OECD (4th edition) for 2013-2019, and UN Comtrade for 2001-2012.
After thorough cross-examination of these four databases, this study learned that these
four databases are identical or almost indistinguishable from each other. Specifically, IMF CDIS
and OECD 3
rd
edition are identical in 2010-2012; IMF CDIS and OECD 4
th
edition in 2013-
2019. Furthermore, OECD 3
rd
edition and UN Comtrade are very comparable to each other in
2001-2012. This study concluded that consolidating different databases would be acceptable and
thus merged IMF CDIS and UN Comtrade databases to create the FDI Index in 2000-2019.

139

Troop Access Index
The Troop Access Index has to encompass different types of access the U.S. and Chinese
militaries have abroad.
345
The U.S. military largely relies on formal agreements—such as the
Status of Forces Agreement (SOFA), Acquisition and Cross-Servicing Agreement (ACSA), or
Mutual Logistics Support Agreement—to maintain its overseas bases and gain access to the
military facilities of its allies and security partners. On the contrary, China does not rely on
formal arrangements and has only one official military base in Djibouti. According to Leah
Dreyfuss and Mara Karlin, “China is not yet building up a global network of bases to massively
project power abroad and to challenge — or even attack — the United States.”
346
But, they and
other scholars note that commercial infrastructure development under the BRI projects in
Pakistan, Cambodia, Myanmar, Tajikistan, and possibly Vanuatu—despite strong denial from
these countries and from China—has the “potential” to become China’s overseas bases in the
future.
347
The 2019 Pentagon annual report also writes, “China’s advancement of projects such

345
On the background of U.S. peacetime military presence since 1950 and transactional access agreement with
hosting countries, see Stacie L. Pettyjohn, U.S. Global Defense Posture, 1783-2011 (Washington, DC: Rand
Corporation, 2012), 61-69. Also see David Vine, Base Nation: How U.S. Military Bases Abroad Harm America and
World (New York: Metropolitan Books, 2015), Kindle.
346
Leah Dreyfuss and Mara Karlin, “Global China: All that Xi Wants: China Attempts to Ace Bases Overseas,” The
Brookings Institution, September 2019, https://www.brookings.edu/wp-
content/uploads/2019/09/FP_20190930_china_basing_karlin_dreyfuss.pdf
347
Ibid. Also see Jeremy Page, Gordon Lubold, and Rob Taylor, “Deal for Naval Outpost in Cambodia Furthers
China’s Quest for Military Network,” Wall Street Journal, July 22, 2019, https://www.wsj.com/articles/secret-deal-
for-chinese-naval-outpost-in-cambodia-raises-u-s-fears-of-beijings-ambitions-11563732482; Keith Johnson, “China
Leaps Into Breach Between Myanmar and West,” Foreign Policy, January 29, 2020,
https://foreignpolicy.com/2020/01/29/china-leaps-between-myanmar-west-india-xi-visit/ ; Timothy R. Heath, “The
Ramifications of China’s Reported Naval Base in Cambodia,” World Politics Review, August 5, 2019,
https://www.worldpoliticsreview.com/articles/28092/the-ramifications-of-china-s-reported-naval-base-in-cambodia;
“‘No foreign troops on Cambodian soil’: Prime Minister Hun Sen insists no China naval base being built,” South
China Morning Post, November 18, 2019, https://www.scmp.com/news/asia/southeast-asia/article/2173939/no-
foreign-troops-cambodian-soil-prime-minister-hun-sen; Andrew Selth, “Burma, China and the Myth of Military
Bases,” Asian Security 3, no. 3 (2007); Gerry Shih, “In Central Asia’s forbidding highlands, a quiet newcomer:
Chinese troops,” Washington Post, February 18, 2019, https://www.washingtonpost.com/world/asia_pacific/in-
central-asias-forbidding-highlands-a-quiet-newcomer-chinese-troops/2019/02/18/78d4a8d0-1e62-11e9-a759-
2b8541bbbe20_story.html ; David Wroe, “China eyes Vanuatu military base in plan with global ramifications,”
Sydney Morning Herald, April 9, 2018, https://www.smh.com.au/politics/federal/china-eyes-vanuatu-military-base-
in-plan-with-global-ramifications-20180409-p4z8j9.html
140

as the ‘One Belt, One Road’ Initiative (OBOR) will probably drive military overseas basing
through a perceived need to provide security for OBOR projects.”
348

Meanwhile, China’s growing military diplomacy in Asia, such as joint military exercises,
port calls, high-level security dialogue, and contact is a prominent trend indicating China’s
growing security cooperation with regional countries. These military diplomatic activities give
China temporary access to the Asian countries for non-combat activities only.
In short, the Troop Access Index had to encompass multifaceted military access the U.S.
and China have abroad. This study attempted to capture that aspect using the different levels of
military presence they maintain in other countries. Information was drawn from multiple sources.
This study used David Vine’s U.S. base database and U.S. base structural reports to find U.S.
overseas military bases in select countries (See Table 5 below).

Table 5: U.S. Military Bases in Select Countries in 1989-2019
349

Peacetime U.S. Base
Secured
1989 2011 2013 2015 2017 2019
Japan (1951) 150 109 113 113 120-121 119-121
South Korea (1953) 125 85 83 83 80-83 80-83
Australia (1955) 5 6 6 6 6 8
Philippines (1947) 12 - - 7 - 8
New Zealand 1 - - - - -
Singapore 2 2 2 2 2 2
Thailand (1950) - - - 2 - 2
Cambodia - - 1 1 1 1
Pakistan - - - 7 - -
China 2 - - - - -
Hong Kong* 1 1 1 1 - -
Source: David Vine (1989, 2015, 2019) and U.S. Base Structure Report (2011, 2013, 2017)
-: means that the total number of U.S. bases does not appear in BSR reports.

348
Office of the Secretary of Defense, Military and Security Developments Involving the Republic of China 2019
(Washington, DC: Annual Report to Congress, 2019). The report can be obtained at
https://media.defense.gov/2019/May/02/2002127082/-1/-1/1/2019_CHINA_MILITARY_POWER_REPORT.pdf
349
According to Vine, U.S. overseas bases include conventional bases and lily pad bases. In 2015, for instance,
Japan has 113 bases (83 bases: 30 lily pads); South Korea (61 bases: 22 lily pads); Australia (3 bases: 3 lily pads);
Philippines (7 lily pads); Singapore (1 base: 1 lily pad); Thailand (2 lily pads); Cambodia (1 lily pad); and Pakistan
(7 lily pads); Hong Kong (1 lily pad).
141

Two sources provide the database on PLA military diplomatic activities, which helped to find
China’s “potential or minimal” military presence in 16 countries surveyed in the study.
350

350
Two sources are Kenneth Allen, Phillip C. Saunders, and John Chen, “Chinese Military Diplomacy, 2003-2016:
Trends and Implications,” China Strategic Perspective, no. 11 (Washington, D.C.: National Defense University
Press, 2017); and “How is China Bolstering its military diplomatic relations?” ChinaPower Project at the Center for
Strategic and International Studies, https://chinapower.csis.org/china-military-diplomacy/#easy-footnote-bottom-2-
3291
142

Appendix C: AIIB and BRI Participation Country List

Table 6: List of AIIB Founding Members by Application Date and Region

Country Application Date Approval Date Region
1 China Signatory of MOU October 24, 2014 East Asia
2 Mongolia Signatory of MOU October 24, 2014
3 Bangladesh Signatory of MOU October 24, 2014 South Asia
4 India Signatory of MOU October 24, 2014
5 Nepal Signatory of MOU October 24, 2014
6 Pakistan Signatory of MOU October 24, 2014
7 Sri Lanka Signatory of MOU October 24, 2014
8 Brunei Signatory of MOU October 24, 2014 Southeast Asia
9 Cambodia Signatory of MOU October 24, 2014
10 Laos Signatory of MOU October 24, 2014
11 Malaysia Signatory of MOU October 24, 2014
12 Myanmar Signatory of MOU October 24, 2014
13 Philippines Signatory of MOU October 24, 2014
14 Singapore Signatory of MOU October 24, 2014
15 Thailand Signatory of MOU October 24, 2014
16 Vietnam Signatory of MOU October 24, 2014
17 Kuwait Signatory of MOU October 24, 2014 Middle East
18 Oman Signatory of MOU October 24, 2014
19 Qatar Signatory of MOU October 24, 2014
20 Kazakhstan Signatory of MOU October 24, 2014 Central Asia
21 Uzbekistan Signatory of MOU October 24, 2014
22 Indonesia Late Signatory of MOU
November 3, 2014
November 27, 2014 Southeast Asia
23 Maldives December 22, 2014 December 31, 2014 South Asia
24 New Zealand - January 1, 2015 Oceania
25 Saudi Arabia - January 13, 2015 Middle East
26 Tajikistan - January 13, 2015 Central Asia
27 Jordan - February 7, 2015 Middle East
28 United
Kingdom
March 12, 2015 March 28, 2015 Europe
29 Germany March 17, 2015 April 1, 2015
30 France March 17, 2015 April 2, 2015
31 Italy March 17, 2015 April 2, 2015
32 Luxembourg March 19, 2015 March 27, 2015
33 Switzerland March 20, 2015 March 28, 2015
34 Iran - April 3, 2015 Middle East
35 UAE - April 3, 2015
143

36 Turkey March 26, 2015 April 10, 2015 Middle East/
Europe
37 Malta - April 9, 2015 Europe
38 Austria March 27, 2015 April 11, 2015
39 Spain - April 11, 2015
40 South Korea March 27, 2015 April 11, 2015 East Asia
41 Netherlands March 28, 2015 April 12, 2015 Europe
42 Denmark March 28, 2015 April 12, 2015
43 Brazil March 28, 2015 April 12, 2015 Latin America
44 Georgia March 28, 2015 April 12, 2015 Central Asia
45 Australia March 29, 2015 April 13, 2015 Oceania
46 Finland March 30, 2015 April 12, 2015 Europe
47 Russia March 30, 2015 April 14, 2015 Central Asia
48 Egypt March 30, 2015 April 14, 2015 Africa
49 Azerbaijan - April 15, 2015 Central Asia
50 Kyrgyzstan March 31, 2015 April 9, 2015
51 Norway March 31, 2015 April 14, 2015 Europe
52 Iceland March 31, 2015 April 15, 2015
53 Portugal March 31, 2015 April 15, 2015
54 Sweden March 31, 2015 April 15, 2015
55 Poland - April 15, 2015
56 Israel March 31, 2015 April 15, 2015 Middle East
57 South Africa - April 15, 2015 Africa

Source: China Daily

144

Table 7: List of BRI Participating Countries by Year and Income Group

Year of Participation Country Income Group
2013 Afghanistan Low income
Belarus Upper middle income
Cambodia Lower middle income
China Upper middle income
Kyrgyzstan Lower middle income
Macedonia Upper middle income
Moldova Lower middle income
Mongolia Lower middle income
Pakistan Lower middle income
2014 Thailand Upper middle income
2015 Armenia Upper middle income
Azerbaijan Upper middle income
Bulgaria Upper middle income
Cameroon Lower middle income
Czech Republic High income
Hungary High income
Indonesia Lower middle income
Iraq Upper middle income
Kazakhstan Upper middle income
Poland High income
Romania Upper middle income
Serbia Upper middle income
Slovakia High income
Somalia Low income
South Africa Upper middle income
Turkey Upper middle income
Uzbekistan Lower middle income
2016 Egypt Lower middle income
Georgia Lower middle income
Latvia High income
Myanmar Lower middle income
Papua New Guinea Lower middle income
2017 Albania Upper middle income
Bosnia and Herzegovina Upper middle income
Croatia High income
East Timor Lower middle income
Estonia High income
Ivory Coast Lower middle income
Kenya Lower middle income
Lebanon Upper middle income
Lithuania High income
Madagascar Low income
145

Malaysia Upper middle income
Maldives Upper middle income
Montenegro Upper middle income
Morocco Lower middle income
Nepal Low income
New Zealand High income
Panama High income
Philippines Lower middle income
Slovenia High income
Sri Lanka Lower middle income
Ukraine Lower middle income
Vietnam Lower middle income
Yemen Low income
2018 Algeria Upper middle income
Angola Lower middle income
Antigua and Barbuda High income
Bahrain High income
Bolivia Lower middle income
Brunei High income
Burundi Low income
Cape Verde Lower middle income
Chad Low income
Chile High income
Cook Islands Upper middle income
Costa Rica Upper middle income
Djibouti Lower middle income
Ecuador Upper middle income
El Salvador Lower middle income
Ethiopia Low income
Fiji Upper middle income
Gabon Upper middle income
Gambia Low income
Ghana Lower middle income
Greece High income
Grenada Upper middle income
Guinea Low income
Guyana Upper middle income
Iran Upper middle income
Kuwait High income
Laos Lower middle income
Libya Upper middle income
Malta High income
Mauritania Lower middle income
Micronesia Lower middle income
Mozambique Low income
146

Namibia Upper middle income
Nigeria Lower middle income
Niue Upper middle income
Oman High income
Portugal High income
Rwanda Low income
Samoa Upper middle income
Saudi Arabia High income
Senegal Low income
Seychelles High income
Sierra Leone Low income
Singapore High income
South Sudan Low income
Sudan Lower middle income
Suriname Upper middle income
Tajikistan Low income
Tanzania Low income
Togo Low income
Tonga Upper middle income
Trinidad and Tobago High income
Tunisia Lower middle income
Uganda Low income
United Arab Emirates High income
Uruguay High income
Vanuatu Lower middle income
Venezuela Upper middle income
Zambia Lower middle income
Zimbabwe Low income
2019 Bangladesh Lower middle income
Barbados High income
Cuba Upper middle income
Cyprus High income
Equatorial Guinea Upper middle income
Italy High income
Jamaica Upper middle income
Lesotho Lower middle income
Liberia Low income
Luxembourg High income
Mali Low income
Peru Upper middle income
Qatar High income
Solomon Islands Lower middle income
2020 Kiribati Lower middle income
2021 Democratic Republic of Congo Low income
**Unknown Austria High income
147

Benin Low income
Comoros Low income
Congo Lower middle income
Dominica Upper middle income
Niger Low income
Russia Upper middle income

Source: Council on Foreign Relations

Abstract (if available)

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University of Southern California Dissertations and Theses

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Asset Metadata

Creator Kim, Ellen (author)

Core Title Fear or greed? The balance of relative interest under the dual hierarchical order in Asia-Pacific

School College of Letters, Arts and Sciences

Degree Doctor of Philosophy

Degree Program Political Science and International Relations

Degree Conferral Date 2021-08

Publication Date 08/04/2021

Defense Date 05/10/2021

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag alignment,Asia-Pacific: U.S. alliance,OAI-PMH Harvest,U.S.-China great power competition

Format application/pdf (imt)

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Kang, David (committee chair), Katada, Saori (committee member), Kim, Annette (committee member)

Creator Email ellen8127@gmail.com,kimellen@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-oUC15676565

Unique identifier UC15676565

Legacy Identifier etd-KimEllen-9986

Document Type Dissertation

Format application/pdf (imt)

Rights Kim, Ellen

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the author, as the original true and official version of the work, but does not grant the reader permission to use the work if the desired use is covered by copyright. It is the author, as rights holder, who must provide use permission if such use is covered by copyright. The original signature page accompanying the original submission of the work to the USC Libraries is retained by the USC Libraries and a copy of it may be obtained by authorized requesters contacting the repository e-mail address given.

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA

Repository Email cisadmin@lib.usc.edu