Why are so many countries rethinking their relations with China?

With the Covid-19 pandemic waning and global conflicts reshaping geopolitics, some nations are reassessing their relationship with Beijing
This rethink could threaten China’s global influence and further divide the world into opposing camps like in the Cold War

Abishur Prakash

Published: 8:30pm, 21 Mar 2024

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Last year, Dutch Prime Minister Mark Rutte surprised many by taking a stance on the rivalry between the United States and China. In an opinion piece calling for greater support for Ukraine, he expressed doubt about China’s dominance in the 21st century, declaring it to be the century of democracy and America.

This marked a significant shift for the Netherlands towards the Western alliance. It initially had few allies in such a move, but other nations are now following suit.

The allure of China is fading as its main strategies, such as providing loans or building infrastructure, struggle to keep countries in Beijing’s corner. With the Covid-19 pandemic waning and global conflicts reshaping geopolitics, nations are reassessing their relationship with China.

This reassessment is evident worldwide. In South America, Argentina’s new president Javier Milei campaigned on distancing the country from socialist nations, including China, and refrained from joining the Brics bloc. In Asia, the Philippines has scaled back Chinese investments tied to the Belt and Road Initiative while Australia is aligning more closely with the US.

In Africa, Kenya and Zambia are seeking alternatives to Chinese financing. In Europe, Italy has withdrawn from China’s signature infrastructure initiative. Trade between China and Lithuania is almost nonexistent – with China importing just US$60,000 worth of Lithuanian goods at the beginning of 2022 – after the latter allowed a “Taiwanese” representative office to open in its capital.

It is not just Western nations pushing away from China, and neither is it only competitors such as India. Also rethinking China are “domino nations” on which China was betting. Equally surprising is that large economies, who can withstand a showdown with China, are treading a fine line while smaller economies, who have far more to lose, are turning away from Beijing.

Dutch Prime Minister Mark Rutte meets US President Joe Biden in the Oval Office of the White House in Washington on January 17, 2023. Photo: Bloomberg

Businesses are adopting a new geopolitical paradigm, too. Italian tyre maker Pirelli played its own chess game to stop a Chinese takeover and remain Italian. US computing company Dell wants many of its devices to be China-free within the decade. Taiwanese manufacturing giant Foxconn is diversifying its footprint away from mainland China.

Why are countries rethinking relations with China? There is no single answer. It is an ideological move for some, who would rather be aligned with democracies. For others it is about trust as they worry about Chinese economic coercion. The rest have a range of concerns from safety to misalignment.

However, overshadowing all of these reasons is a profound transformation that challenges decades of Chinese grand strategy: economics no longer drives foreign policy. The new era of rethinking relations with China represents a sharp pivot as everybody seemed to want to win over China just a few years ago. Now, even before China reaches the same level as the US, some are pulling out.

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There is no greater challenge that China faces to its future standing and weight. For the rest of the globe, rethinking China threatens to further split the world into opposing camps.

First, nations rethinking China could generate new friction between neighbours. Look at central and eastern Europe. While countries such as the Czech Republic, Estonia, Latvia and Lithuania distance themselves from China, others such as Serbia and Hungary are moving further into Beijing’s orbit. As the China rethink spreads, echoes of the Cold War could return as borders indicate the end of one tribe and the beginning of another.

Second, the West is raising the heat on those who refuse to pick sides, indirectly prodding them to rethink China. Recently, thousands of Volkswagen vehicles were held up at US ports because a Chinese component breached US forced labour laws. Also, Emirati AI firm G42 announced it was divesting itself from China and acquiring US hardware after it was investigated by the CIA. These moves send a clear message to not get too close to China.

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Taiwanese supporters queue up to buy Lithuanian rum held up by mainland China

Third, the decision to rethink China does not necessarily translate into moving closer to the US. The West faces internal divisions, while outside the West nations such as India and Saudi Arabia are attempting to lead with their own ideas and incentives. All of this means the balance of power is not just fluctuating between China and the US but among many countries as the number of nations seeking to lead on the world stage grows.

More than a year after Rutte’s declaration, the Netherlands shut down its consulate in Chongqing. For the Dutch, it is full steam ahead when it comes to rethinking China.

But while some nations make their allegiances known, others are striving for neutrality. For instance, Canada freezing participation in the Chinese-led Asian Infrastructure Investment Bank has not inspired similar moves elsewhere. Similarly, when Norway’s sovereign wealth fund shut down its office in China, no other countries followed suit.

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However, the real takeaway is not how many countries are distancing themselves from China but the fact that some are willing to do so, each with their own reasons. What was once unthinkable for China is now a harsh reality.

Therein lies three great challenges facing the world. First, how long will Western countries tolerate others staying neutral while attempting to maintain relationships with both sides? Second, is there a possibility that China could compel nations to pledge unwavering allegiance to Beijing? Finally, as nations reconsider their ties with China, might they find themselves re-evaluating relationships with other global actors?

While the answers to these questions are still unknown, one thing is certain: tomorrow’s geopolitical landscape will look very different from today’s.

Abishur Prakash is the founder of The Geopolitical Business, an advisory firm in Toronto