An old friend from high school—a few years ahead of me—sent me an interesting piece: China’s Strategy for Breaking Through the US Encirclement—AIIB, NDB, and the Belt and Road. What follows are my thoughts after reading it.
Summary
While many countries have entered into agreements with China for mutual economic gain, these pacts are unlikely to translate into substantive political or military alliances. In corporate parlance, such multilateral frameworks are closer to non-binding MOUs than to definitive strategic mergers.
China faces formidable challenges in securing its ambitious 10,000-kilometer transcontinental rail and maritime routes. The anxieties of Central Asian and Eastern European countries about Russia, coupled with friction between China and its neighbors in Southeast and Northeast Asia, present significant diplomatic hurdles. The Middle East remains a critical pivot; if Beijing secures full cooperation in the region, it could open a corridor through the Arabian Sea to Africa, significantly undermining U.S. strategic dominance. However, Washington’s commitments to Israel complicate its response to this shift.
In its bid to bypass maritime blockades and bolster the Renminbi’s global status, Beijing has launched several initiatives—the AIIB, NDB, and CRA—simultaneously. While the global balance of power is inherently fluid, China is unlikely to achieve its primary objectives in the short term due to the sheer number of geopolitical variables.
Among the founding members of the NDB and CRA, India—the only country with a demographic scale comparable to China’s—will not simply align with Beijing’s interests. Similarly, Brazil’s geographical proximity to the United States makes its stance highly contingent on Washington’s diplomatic maneuvers. Meanwhile, Russia remains encumbered by regional adversaries and internal political volatility. That said, the success of China’s grand strategy requires seamless cooperation from a diverse array of countries, a prospect frequently hindered by conflicting national interests.
In reality, China is acting as the sole key player navigating a fragmented landscape. To establish new international institutions on a stable footing, Beijing must first secure unwavering support from its Asian neighbors. To counter China’s acquisition of Gwadar Port and its subsequent access to the Arabian Sea, the United States may be compelled to adopt a more conciliatory posture toward Iran, which is geographically connected to Pakistan. In this context, the conclusion of the Iran nuclear negotiations appears highly probable.
Positioned between this Sino-American tug-of-war, Korea must leverage its strategic value to elicit cooperation from both powers on Korean unification. The current administration’s pivot toward Beijing suggests an active pursuit of this diplomatic balancing act. As Korea appears to be leaning toward joining China’s AIIB, the deployment of THAAD—with the Korean government claiming that it has little choice in the matter—is ultimately likely to go ahead on Washington’s terms.
While some of my views overlap with those in the linked piece, I differ on many other points. I will therefore address each issue separately below.
1. The AIIB Is Not Just Another Bank, but Part of a Larger Chinese Strategy
It is too early to declare the AIIB as a Chinese victory, but it is also wrong to dismiss it as merely another development bank. The truth lies somewhere in between. The more accurate view should be to see the AIIB as one component of the broader financial, logistical, and diplomatic package China has put forward in response to US maritime dominance and the dollar-centered international financial order.
China remains heavily dependent on maritime trade routes, especially the Strait of Malacca. The United States can keep exploiting that vulnerability through its naval power. This is why China has been pushing both the overland and maritime Silk Road at the same time. On one side, it is trying to build rail networks linking Central Asia and Europe. On the other, it is developing port networks stretching across the Indian Ocean, the Middle East, and Africa in an attempt to reduce its dependence on sea lanes, even if only marginally. The AIIB is the financing vehicle meant to support that effort.
In that sense, the AIIB is not simply a bank. It is a tool for channeling China’s domestic overcapacity outward, tying the infrastructure demand of surrounding countries to Chinese capital, and eventually widening the use of the renminbi. The words “Asia,” “Infrastructure,” “Investment,” and “Bank” were not chosen by accident. Asia is the theater, infrastructure is the substance, investment is the inducement, and the bank is the mechanism that makes the whole thing run.
2. Economic Cooperation Is Not the Same as Political Incorporation
This is where the real problem begins. If one assumes that a growing number of AIIB member states means those countries have somehow become China’s political friends or strategic allies, the analysis immediately goes off course. Signing on for economic gain is one thing; shifting one’s diplomatic and security posture toward China is something else entirely.
The participation of countries like the UK or Australia should not be read as proof that the balance has already tipped. At most, it shows that Western countries are willing to join institutions created by China when doing so serves their interests. It does not mean the US-led order is collapsing. Membership is one thing; actual alignment is another. The two should not be confused. The UK and Australia remain part of Five Eyes, the core of the US security framework.
3. The Point of the Overland Route Is Not to Replace Sea Power, but to Spread Risk
The same applies to the overland route. The fact that rail lines are being built does not mean a maritime blockade has been neutralized. Rail can never match sea transport in either volume or cost. China is not building overland routes because it intends to abandon the sea. It is building them because it wants additional options if something goes wrong at sea.
In other words, the real significance of the overland Silk Road lies not in replacing maritime transport, but in spreading risk. Miss that distinction, and it becomes easy to drift into exaggerated claims that a few new rail lines mean the US containment structure has already fallen apart.
4. The Real Obstacle Is Not Capital, but the Coordination of Interests
The routes China envisions are too long, the number of countries involved is too large, and the internal circumstances of those countries differ too sharply. Central Asia and Eastern Europe include states still bitter over Russia. Southeast and Northeast Asia include states deeply uneasy about China. Those countries may be willing to accept Chinese capital because they need the money, but that does not automatically mean they will tilt toward China politically.
Railroads do not come into existence simply because lines have been drawn on a map. Every country along the route has its own regime, internal security situation, diplomatic posture, and outside backers. Ports are no different. Building a port does not by itself create a viable sea lane. It still matters who controls the surrounding waters, how coastal states respond, how transshipment and insurance are handled, and whether there is any credible fallback in a crisis. China’s plan is large, but the number of things that must be brought into line is just as large.
5. The Weight of the Game Depends on How the Middle East Moves
This is where the Middle East becomes critical. If the region gives China broad cooperation, China will gain far easier access to African and Middle Eastern resources through the Arabian Sea. If that happens, the leverage the United States now holds through the Strait of Malacca and the waters around East Asia will weaken. If, on the other hand, things become tangled in the Middle East, China’s maritime Silk Road runs into trouble halfway through.
In the end, how much damage the United States suffers depends on how the Middle East positions itself. But the United States cannot simply rearrange the region however it likes. Israel is a major constraint. That makes it difficult for Washington to redraw the Middle East on its own terms. At that point, US-China competition stops being merely an East Asian issue and becomes directly tied to the balance of the Middle East as well.
6. Gwadar Matters, but It Does Not Decide the Game by Itself
Gwadar is clearly important because it represents China’s attempt to secure an outlet to the Arabian Sea. But Gwadar alone does not settle the matter. For the port to function as intended, Pakistan’s internal situation has to hold together, inland connections must be built out, pipelines and railways must be connected, maritime security must be ensured, and neighboring states must not react in ways that disrupt the project.
If the United States wants to counter this, it will eventually have to deal with the axis on the other side of Pakistan. That is where Iran becomes important. The more China expands its access to the Arabian Sea through Gwadar, the harder it becomes for the United States to treat Iran as a simple adversary. If Iran is pushed out entirely, the space for containing China shrinks as well. From that perspective, the odds of an Iranian nuclear deal being reached look fairly high. Washington has reason to keep the Middle East within manageable bounds rather than drive the entire region toward open confrontation.
7. China Is Trying to Do Too Many Things at Once
The sheer number of fronts China has opened is itself a problem. The AIIB alone would already be a major undertaking, but China has added the NDB and the CRA on top of it. The intention is clear enough. The AIIB is meant to channel infrastructure finance, while the NDB and CRA are supposed to create financial mechanisms through which emerging states can protect themselves outside the Bretton Woods system.
But intent and execution are different matters. China is simultaneously trying to reduce its maritime vulnerability, raise the standing of the renminbi, bind surrounding countries through infrastructure, and establish alternative international financial institutions. It is a bold move, but it is also too much at once. The balance of power does shift over time, and in the long run China’s direction may well prove viable. But in the short run, the odds that events unfold exactly as Beijing wants are not especially high.
8. BRICS Does Not Move as a Single Bloc
It is also risky to assume that BRICS will behave as a single bloc through the NDB and CRA. India is almost the only member with a scale remotely comparable to China’s, but that does not mean it will simply move where China wants it to move. There are areas where their interests overlap, but there are also many points of friction.
Brazil is a major South American power, but it is also too close to the United States for its choices to be treated as fixed. Russia, meanwhile, is surrounded by adversaries and unstable both internally and externally. For China’s broader plan to work, the states involved would have to set aside their own calculations and cooperate above a certain threshold. There are simply too many variables for that to be assumed. Creating institutions is one thing; having those institutions actually reshape international order is another.
9. Before China Can Expand Outward, It Has to Stabilize Its Own Neighborhood
With all this in mind, the place China needs to secure first is not Africa or Europe, but its own neighborhood. If Beijing wants to establish new international institutions on a stable basis, it first needs reliable support from the countries around it. Yet the reality is the opposite. Southeast Asia is wary of China because of the South China Sea. Northeast Asia is hardly inclined to bind itself closely to China either, given the weight of historical and security issues.
China has set out to shake the international order abroad, but it still has not built a firm base around itself. That is a major weakness. A strategy that tries to expand outward while the surrounding region remains unsettled will be expensive to sustain.
10. The AIIB Is Better Understood as China’s Gambit Than as China’s Victory
At this stage, the most coherent way to interpret the AIIB and the Belt and Road project is not as a Chinese victory, but as a Chinese gamble. It is still too early to say that the US containment structure has broken down. But it is also hard to claim that the United States still holds every card.
China has clearly begun making serious attempts to put pressure on US maritime dominance and the dollar-centered order. But for those attempts to produce lasting results, the diplomatic positions and domestic political conditions of too many countries would have to line up at the same time. That is not something money alone can solve. In the end, the outcome will depend less on the size of China’s resources than on its ability to coordinate conflicting interests, manage relations with neighboring states, contain geopolitical risk in the Middle East, and preserve cohesion within BRICS.
11. The First Problem China Has to Solve Is Trust
For that reason, the first problem China has to solve is not in Africa or Europe, but in its own neighborhood. New institutions cannot be stabilized unless neighboring countries are willing to support them with some consistency. But again, the reality runs in the opposite direction. Southeast Asia remains wary of China because of the South China Sea, and Northeast Asia is reluctant to become deeply entangled with China because of long-standing historical and security concerns.
The deeper issue is trust. Making use of Chinese capital and markets is one thing; tying oneself over the long term to a China-led order is something else. At a certain point, even China’s own citizens do not fully trust the system. It is an open secret that many wealthy Chinese keep their assets abroad through paper companies in Hong Kong or Singapore. That is not very different from wealthy Russians holding their assets in dollars or gold rather than in rubles. If even China’s own elites behave this way, neighboring countries are unlikely to think differently. They may welcome Chinese capital, but that does not mean they are ready to be folded into a China-centered order.
12. Why China Fails to Win the Trust of Its Neighbors
That distrust is not just some vague sentiment. The issue becomes obvious the moment one looks at communications and information security. When China pressed Korea to accept Huawei, many people did not first think of technology or price. They thought of security. In China, major corporations and state power are not meaningfully separable. No company can grow into a major firm in China unless the CCP backs it. Not only do Chinese security agencies also have broad legal authority to monitor communications, even the name Huawei (華爲) itself carries political overtones; the name came from Zhonghua Youwei (中華有爲), meaning “working for the rejuvenation of China” or “China can do it."
That does not mean the United States is innocent. As Snowden witnessed, the United States has also spied on and monitored its allies. One side gains access through equipment and infrastructure; the other does so through networks and intelligence agencies. The methods differ, but both raise issues of trust.
Even so, neighboring countries are more wary of China for reasons that go beyond surveillance alone. The deeper concern is how China would treat its neighbors once it has more power. Economic incentives by themselves are not enough to draw neighboring countries durably into a China-led order. Beijing would first have to solve the trust problem.
13. The Position Korea Should Take
As US-China tension intensifies, Korea needs to be able to extract what it needs from both sides. If eventual unification is taken seriously, then Korea has to make use of both the United States’ security assets and China’s economic leverage. In that kind of environment, leaning too early toward one side and narrowing one’s options would be a mistake.
President Park Geun-hye’s decision to increase contact with China soon after taking office should be understood in that broader context. No outsider can know how far those discussions has progressed, but it is highly likely that the Korean government is trying to play the balance between Washington and Beijing more actively rather than adhering to the traditional pro-US framework.
To sum it up: the AIIB is a meaningful step forward in China’s external strategy. But it is too early to say that China’s era has arrived on just that basis. Economic cooperation is not political alliance; land routes cannot replace sea routes; creating an international institution and adding a few member states does not amount to seizing hegemony. It is true that China has succeeded in enlarging the game, but it has not yet locked it in. This is not the stage to declare victory or defeat. It is the stage to watch which side, the United States or China, can manage more variables more effectively.