China's 'soft power' blitz no major concern: US study

by P. Parameswaran Mon May 5, 10:18 PM ET

WASHINGTON (AFP) - Cash-flush China may be winning allies and displacing American influence by ramping up foreign investments and disbursing aid with no strings attached, but a US congressional study says Washington need not lose sleep over it.

Beijing's rising investments on the back of its huge pool of US dollar reserves is not necessarily always popular at home or abroad and accounts for less than one percent of foreign direct investment worldwide, said the Congressional Research Service study.

Furthermore, China's "soft power" achievements using tools such as trade and investment, development and humanitarian aid, cultural influence and travel and tourism are built on a "very narrow base," it said.

And even in those areas, including disaster relief, China's effort and accomplishments "pale beside those of the United States," said the report.

The study, undertaken by a group of China specialists and regional analysts, examined the strengths and weaknesses of China's foreign policy and growing use "soft power" in Asia, Africa, and Latin America.

"Contrary to some projections of China's ability to displace American influence through the use of soft power, the CRS report indicates that China must grapple with many limitations on its influence," said Senate Foreign Affairs panel chief Joseph Biden, who commissioned the study.

While China uses soft power to increase its economic and political leverage globally amid US preoccupation in Iraq and a weakening US economy, Beijing's success "has been mixed and its influence remains modest," he said.

China is attempting to exploit areas in which it holds a comparative advantage to increase its influence, sometimes in a way that runs counter to US interests, the study said.

For example, it said China's willingness to provide no-strings-attached foreign aid "often undermines international efforts to combat corruption, improve transparency, and foster respect for human rights."

On the plus side, however, China's involvement in Africa for example was spurring investment in infrastructure, the financial services and manufacturing as well as market niches that non-Chinese foreign investors had generally long ignored.

China also provides the developing world access to cheap credit and inexpensive consumer goods, and many countries are enjoying rapidly rising revenues due to Chinese demand for their exports, the report said.

On the other hand, it said, China's manufacturing strength made it difficult for industries in the developing world to gain a competitive advantage, putting some out of business.

And China's investment in developing economies, particularly in natural resource extraction, "sometimes undermines international efforts to link aid and investment to measurable progress by recipient countries in combating corruption, improving transparency, and respecting human rights."

Beijing's foreign entanglements sometimes backfired -- the report discovered cases where Chinese economic engagement became the subject of intense, xenophobic political debate.

The study showed that China's foreign direct investment worldwide amounted to 73.3 billion dollars at the end of 2006 -- a paltry 0.58 percent of such global investment.

It noted that while China's state-owned assets "may be obedient to state authority," America's private sector left a "substantial global footprint," sometimes overlooked by those comparing only government--directed overseas initiatives.

The US Congress plans in the weeks ahead to conduct hearings examining US-China relations, China's use of soft power, and opportunities for Washington to use its own "smart power" by engaging China to work with it to advance common interests, Biden said.