According to the World Economic Forum, in 2020, Asian economies will become larger than the rest of the world combined. China’s central role in the Asian economy is leading this endeavor. Paramount to this enterprise is China’s Belt and Road Initiative (BRI). In 2013, Chinese President Xi JinPing launched the BRI Initiative, inclusive of the Silk Road Economic Belt and the 21st Century Maritime Silk Road, infrastructure development and investment plan that would stretch from East Asia to Europe. China has already allocated an estimated $200 billion dollars on the initiative. Morgan Stanley predicting the Initiative to reach $1.2 – 1.3 trillion by 2027, connecting more than 65 countries. According to Morgan Stanley, the initiative will “accelerate China’s transformation into a high-income economy and its position as a global economic superpower.” Indeed, it is already evident that China is seeking to promote itself as a global economic hegemon.
Development finance
China further expands its hegemonic tentacles by its project finance initiative. Since the beginning of the Going Global initiative, China has become the largest provider of development finance.
One way that China benefits from the development financing contracts it creates is by bolstering economic ties. In The Forum on China-Africa Cooperation, for instance, China concentrated 60.5 percent of its development finance in industries such as transportation and energy generation. This serves a bilateral purpose because it helps connect China with African markets whilst giving access to natural resources. Furthermore, these are industries in which China excels. By investing in these industries, China creates jobs for Chinese laborers.
China’s investments create jobs for China, not its partners
Often times, China loans money or invests in countries with the condition that they hire Chinese workers and buy or rent Chinese machinery. China by now has become Africa’s largest trade partner, reaching upwards of US$32.35 billion in 2014. However, despite being the largest trading partner, it has failed to garner positive opinions from the public and the media. Many have expressed concerns that Chinese firms import Chinese labor in large numbers, and are unwilling to hire locals, thus contributing to higher unemployment rates in Ethiopia, Sudan, and other African countries. A 2007 report published by Angola Ministry of Finance analyzed infrastructure projects granted to Chinese firms consisting of 3136 employees, out of which only 1872 were Angolans. Approximately 40% of the labor forces were imported Chinese workers. Other complaints have included low wages, long working hours, poor working conditions and safety standards among Chinese companies.
China targets countries unable to repay Chinese loans
Moreover, China carefully selects the recipient countries for loans. It consistently chooses countries that are unable to pay their debts. When countries are unable to repay, China requires payment in natural resources, such as in the case of Venezuela when it was forced to ship roughly half of its oil to China in 2015. In 2017, Sri Lanka due to an outstanding $1.1 billion in debt was forced to lease 70 percent of the Hambantota Port equity for 99 years. The Chinese government repeatedly lures countries into contracts in which China is the sole beneficiary. Since 2000, China has rendered more than $354 billion in loans, grants and other resources to countries around the world. Over 75 percent of China’s financing did not meet the criteria set forth by the Official Development Assistance (ODA) enumerated by the Organization for Economic Cooperation and Development (OECD).
China’s development finance falls under the category of Other Official Flows (OOF). OOF is a class of financing that is not designed to inspire economic growth and welfare in recipient countries. In other words, China provides loans and grants not to help its recipient countries but to further its own needs through predatory practices.
China is acquiring ports
With the ambition of securing its position as a maritime hegemon in order to enhance its international trade capacities and establish its geo-economic leverage, China has purchased or confiscated a chain of ports worldwide over the past decade. China’s string of ports adds to its Maritime Silk Road framework and stretches across Asia, Middle East, Africa, Europe, and Latin America. Since 2013, Chinese companies have participated in the construction and operation of 42 ports in 34 countries, and have signed 38 bilateral and regional maritime agreements across 47 countries.
The acquiring of ports reflects Beijing’s maritime ambitions. According to the International Monetary Fund (IMF), China ranks as the world’s largest exporter and the world’s second-largest importer. The acquisition of ports is critical to its economic development. China has acquired 46 existing or planned port projects in Africa. This is stressful on the continent where ninety percent of African exports depend on ports, thus making African governments and businesses reliant on China.
China requires its partnering nations to vote in line with China
Greece is another example of how China tapped in at an opportune time to take advantage of the pitfall that the economic crises the past decade have caused. In this case, a Chinese firm bought 51% port authority of Piraeus port, and therefore holding the majority stake. This appears to be a reoccurring scenario as it is one of the 13th European ports which Chinese companies have acquired in recent years. This form of advancement appears to strengthen the nation as the “superpower of the seas” but also to give China a hand on domestic and foreign political outcomes for these countries. One example is Greece, a country that is likely to make political decisions by taking into consideration whether such decisions would disrupt Greece-China relations.
Not only is China’s aim to consolidate its geopolitical strategies by accessing countries’ lands, be it political and military strategies, it also provides a way to obtain access to oil and natural gas reserves through debt trap strategy. Furthermore, emerging economies and small nations risk losing sovereignty and decision-making powers through long-term loans, high interest, and dependency on China.
China undermines freedom of speech
China uses its economic leverage to control and direct language to enhance and advance its policies for both Chinese and non-Chinese citizens around the world. The communist nation has forced companies located in countries like the United States, Germany, and Australia to fire employees who voice support for Hong Kong, Taiwan, and Japan. Most recently, due to the growing support for the Hong Kong protests and Taiwan’s independence, China has instructed its companies and export/import partners to retaliate against employees subsequent to voicing their support for protests, even if said entities are based on foreign soil. There are numerous examples of this strategy manifesting in recent years.
Just this past August, Rupert Hogg, CEO of Cathay Pacific was forced to resign after he voiced his support for the right of his employees to protest in Hong Kong. The chairman of the board along with the chief commercial officer also resigned. Chinese restrictions on free speech have even reached the United States. Daryl Morey, the Houston Rockets general manager deleted a tweet supporting the Hong Kong protests, apologizing and walking back his comments following a backlash.
The Chinese government, because it works with foreign companies or operates businesses in foreign countries, stifles vocal support for opposition views. By preventing individuals and companies from voicing their support it actively decreases the support given to its opposition.
What is China hoping to achieve by acquiring ports?
By acquiring ports, China gains tributary states. These states are subordinate to powerful neighboring states or economic partners. When they are indebted to China, or worse, their ports or natural resources such as oil and gas are at stake, they will vote in line with China at the United Nations. Moreover, they will conform to China’s demands, such as not recognizing Taiwan as an independent nation or not supporting Hong Kong protests. The overall goal for China, however, is to change and shape trade regulations so it does not have to abide by American and international trade regulations.
International and United States regulations forbid bribery and have established standards for economic development financing options that have made it difficult for China to penetrate and influence countries. An example mentioned above are the standards set forth by the Organization for Economic Cooperation and Development meant to protect destitute countries from large economic predators. The criteria are enumerated specifically to protect minority nations from falling prey to countries that seek to develop contracts with little benefit to the minority nation.
Another example, which former Vice President Joe Biden has called a “cancer in Africa”, is corruption and bribery. Especially in Africa, the Chinese government has not hesitated to use all trickery, even bringing a suitcase full of cash to close deals. Corruption in Africa, the former Vice President continued, “not only undermines but prevents the establishment of genuine democratic systems. It stifles economic growth and scares away investment. It siphons off resources that should be used to lift people out of poverty.” On the other hand, American and other Western foreign bribery prohibitions may not be able to “sweeten” the deals, yet they provide long-term quality and reliability. Following dishonorable business conduct, African companies are looking at American partners with a renewed vision based on qualities such as responsiveness and training, which China often neglects. However, it is often the case that host countries find out too little too late the actual price of Chinese deals, as they are forced to give up ports, ergo export and import capabilities, and natural resources such as oil and gas that in the end costs way more than initially enumerated.
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