Henry Hopwood-Phillips

The Chinese Monkey Trap

March 05, 2018

Textbooks that only a decade or so ago sang the praises of globalisation as the great leveller—a phenomenon that would turn guns into emoticons and borders into history—feel dated already. Instead of asking whether globalisation would occur and what benefits it would provide, the question of whose globalisation and what kind it would be could have been more apposite. Dissenting voices existed, but thinkers such as Samuel Huntington and John Gray seemed perversely pessimistic when predicting civilisational tension or resource conflicts as likely scenarios.

For the most part, nonetheless, the academic centre held; with the American postwar order remaining more or less intact. But for how long?

Recently, whilst boating up the Mekong, perhaps ten kilometres north of Luang Prabang, I came upon a giant bridge thrust out—a jungle parody of J.M.W. Turner’s “Rain, Steam and Speed” (1844)—that, as it turns out, was a part of a Chinese rail project linking all of South East Asia.

Most have heard of China’s One Belt One Road (OBOR) or Belt Road Initiative (BRI), whether in sensationalist columns that sell it as a hubristic scheme in the Soviet tradition or, piecemeal, as a drip of small news items that inform of random elements like Laos’ high-speed railway. Its vision—to enhance supply chains, primarily through debt-financed infrastructure projects and free-trade corridors via three routes and a maritime road; with China sitting at the centre of this web—is unabashedly ambitious.

One Belt, One Road (OBOR); Chinese strategic investment in the 21st century © iStock/ hakule

 

But the reality is that the big figures—such as a potential $1.5-3trn budget involving approximately 60 countries and over 200 enterprises, generating a GDP of $21trn—and sugar-coated slogans—with favourites like “win-win cooperation” and embracing “our shared destiny,” to which I’m sure every sort of dubious character from Sauron to Hitler would have subscribed—are not as hegemonically titillating as some commentators might suggest.

Nor is China glad to merely uphold the status quo. Instead, as the British once used congresses and ships to establish global power, and the US maintained it via Bretton Woods and the Marshall Plan, what China seeks is to remake global infrastructure in its image while the sector is still in its infancy.

This foreign policy objective, stemming from its famous 1999 “Go Out” agenda, which encouraged Chinese citizens to invest in neighbouring countries, ties in perfectly with its economic strategy. Since late 2013, inward investment to China— huge from 1992 onward—has been surpassed by Chinese investment abroad. This meant emergent capital surpluses needed to be channelled properly—that is, according to the logic of the government.

Though OBOR was designed for a savings-rich China with an excess capacity in industries like steel and cement, it remained afflicted by reliance on state-owned enterprise, state-subsidised finance and an undeveloped service sector. Rather than have ghost cities (like Ordos), flagging growth or downgraded credit ratings creep into the news; Deng Xiaoping’s project for a low-profile China, biding its time, was jettisoned in lieu of Xi Jingping’s vision of a China that would seize its moment through OBOR.

Despite Chinese claims to the contrary, the apple of politics rarely falls far from the economics tree. OBOR could be characterised as fulfilling a similar role for globalised infrastructure to that which toll-roads performed for the Industrial Revolution, i.e. providing the first circuits of power. It would be furthermore naïve to portray China as seeking only economic security in the form of resources when it also practices industrial espionage, aims to control supply bottlenecks and propagates numerous manners of soft power.

There are many worrying signs of economic pressures being applied to the diplomatic sphere. Greece, for instance, vetoed the EU’s proposal to officially reprimand China on its human rights record after $425m flowed into its coffers for the port of Piraeus. Rodrigo Duterte, a close ally of China’s when generous loans were tabled, grumbled that Xi Jinping subsequently warned him that China was prepared to go to war if the Philippines drilled for oil in disputed parts of the South China Sea.

China also risks irritating nations with big promises and little follow-through when ground-level realities are ignored to accommodate higher political pressures, or money fails to flow for top-down political reasons. Whatever the cause, opacity can leave even powerful actors guessing, as in the case of Indonesia, where the Joko Widodo administration has been forced to speculate whether the reason only 7% of Chinese investments planned between 2005-2014 materialised is due to anti-Chinese sentiments, weak property protection laws for foreigners or, simply, low prioritisation in the greater scheme of things. A similar story played out with the massive Bandar Malaysia railway hub in Kuala Lumpur, which China pulled out from sans explanation.

Edificio España © Gutiérrez, Ricardo. El País (In English). García Gallo, Bruno. “Madrid City Hall to forbid owner of Edificio España from tearing it down”. Madrid, 24 July, 2015.

 

Cultural insensitivity has also played a role in China’s woes. Among the most obvious examples of this was the decision of property developer Wanda Group to demolish Madrid’s historic Edificio España (Figure 2) for a new building project. Cries of philistinism, ignorance and disrespect were quickly raised, leading to the group’s abandonment of the project in the throes of a PR disaster.

In a similar vein, the entry of Chinese capital is invariably associated with the arrival of Chinese labour, middlemen (pulled from a huge personal business network known as guanxi), environmental degradation and corruption. In Laos, passports are sold for as little as $60,000 so that the Chinese can out-manoeuvre obstructive laws; lands are poisoned with the pesticides of Chinese banana plantations, such as paraquat; villages are displaced to make way for Chinese hotel-casino complexes and dams; and electricity, always short on the ground, is sold pittance to its giant neighbour, earning Laos the unflattering moniker of the “battery-pack of Asia.”

Cambodia is another doormat friend to China, with the latter accounting for roughly 70% of its foreign investment. It is also an instructive instance of how China will behave when it thinks it can get away with it. Behind the movers, fixers and shakers making the deals, such as the notorious “Big Brother Fu,” there is talk of incoming aid and loans—and outgoing profits. Worse, Cambodian gems such as its national parks and coastline are being bought up with laws waived, and places like Sihanoukville grind to a halt as Chinese mafias inevitably follow the casino-trade and its related businesses.

Whenever locals choose to rile about this state of affairs, China encourages anti-Vietnamese protests on red-button issues such as the return of Kampuchea Krom to the Mekong delta. At a national level, this ensures that president Hun Sen acts as a proxy by repeatedly blocking ASEAN from making statements critical of China’s expansive territorial claims in the South China Sea. Thanks to his obeisance, China now has a deep-water port on the Gulf of Thailand just a few hundred kilometres from the disputed territories. Rewards for Hun Sen’s political acrobatics include the equipment of his 3,000-strong private army, which seeks to protect him and his wife, the “Most Glorious and Upright Person of Genius” according to official nomenclature.

Only entire subcontinents, such as India, have proven difficult for China to subdue. Collectively a third of humanity, both countries sent troops to a stand-off at a plateau in Doklam last year: China to ensure its $62bn China-Pakistan Economic Corridor (CPEC) went ahead; India, to ascertain that China recognised the road it wanted clearly ploughed through Bhutan. Though this never escalated past theatrical stone-throwing, it may have only been because a return to the status quo was rapidly agreed upon. In the meantime, other flashpoints include Pakistan’s Gwadar Port, where a Chinese naval base is likely to be built, and Sri Lanka, where Hambantota Port was taken on a 99-year lease by China in December, 2017.

A much easier ride has been provided by Africa, where China has earmarked a mammoth future market (thanks to the fact that, by 2050, 25% of the world’s population will consist of Africans under 30). Surpassing the US as Africa’s largest trading partner in 2009, supplying 52 diplomatic missions to Washington’s 49, and with a naval base in Djibouti, China is doubly wary of (not) seeming neo-colonial as it scours the continent for oil, copper, uranium, cobalt and iron ore. To deflect attention from straightforward economic concerns—such as the fact that Africa now suffers a trade deficit with it—, China has visibly pursued a policy of non-interference, giant soft loans (such as Kenya’s Nairobi-Mombasa line) and subsidised TV sets which churn out kung-fu films, Chinese news broadcasts, and documentaries on Chinese history dubbed in English.

Nor have Greece and Turkey, the gateway-nations to the European Union, been overlooked. When Greece succumbed to creditor budget restrictions, it was China that bought its assets, placing the country in an awkward position when it came to China’s reputation for pollution, corruption and repression. Vetoing the EU’s statement on China’s human rights violations, political language invaded the diffident lexicon of diplomacy, with Greece attacking the EU’s approach as “unproductive” and China applauding Greece for being “the relevant EU country” in a move that Greek MP Costas Douzinas described as “neo-colonialism without the gunboats”. (Gunboats were, however, introduced as three Chinese frigates arrived at Piraeus in autumn last year, when the Greek government promised to follow through on its election pledge to halt the port’s privatisation).

China had already purchased Turkey’s third largest harbour, Kumport, the year before. Rapidly scaling each up, with the former doubling the rate at which it handles containers from 1.85 million in 2009 to 3.7 million in 2016, the sheer exuberance and speed with which these shiny mega-projects crop up captures the political imagination. Too much, perhaps, as Chinese values—sold as “economic progress”—came to displace the beliefs of the leftist Syriza; most glaringly at Hellenikon, Athens’ pre-Olympics airport, where refugee camps were cleared, claims of archaeological sites wafted aside and regulatory hurdles waived so that a Chinese conglomerate could build a millionaire playground to attract over 1.5 million Chinese tourists in the next five years.

These events have not gone unobserved by Germany, where Chancellor Merkel has tightened rules to limit the takeover of strategic German assets. “We must speak to China with one voice,” she warned Greece. “Seen from Beijing, Europe is an Asian peninsula.” Not that much of Eastern Europe has listened. Instead, it joined 16+1, a platform for regional cooperation where the “plus one” is, naturally, China.

But Chinese cooperation has a habit of looking like straightforward penetration. Though the Chengdu-to-Lodz line is filled to the brim with Chinese goods en route to Poland, the latter struggles to pack anything other than apples, poultry and powdered milk on the journey back. This results in an embarrassing state of affairs as the Chinese aim to boost trains from 400 to more than 2,500 per year.

Erstwhile, in the Ukraine, China’s Skyrizon has been accused of wanting to steal Motor Sich’s aircraft engine technologies and expertise (an accusation that pales when compared to the industrial espionage it conducted against the US as per the 1999 Cox Report, where nuclear secrets were stolen, or the attempted infiltration of the German top brass last year, or the bugging of the Chinese-built African Union headquarters, that have transferred data to Beijing every night for the past five years).

Alongside Chinese attempts to supplant western-orientated lending institutions such as the Asian Development Bank, International Monetary Fund and World Bank with its own funding mechanisms such as AIIB, CIC and Chexim, among others; its political manoeuvring is aimed at setting up an economic system that’s a throwback to 17th century mercantilism. This was made palpable just last month, in the light of its clampdown on capital outflows, which were putting pressure on the Renminbi and draining foreign exchange reserves. Reversing measures that liberalised capital outflows clearly signals that the government wants to control investment abroad strategically by destroying lone-rangers and cowboys, whilst making sure that few can operate in China from abroad with quite the same ease. Stability, security and control over international resources and populations—not economic liberalisation—are clearly the Chinese state’s objectives, and they may entail relinquishing control of the domestic narrative.

Put simply, the playing field is skewed. The Chinese are happy to play the post-war liberal order on its own merits abroad, while relaxing and tightening regulations—that is, creating and diminishing opacity—at home to suit a political agenda that looks, talks and smells a lot like a managed economy. Slinking around the globe tossing byzants into everybody’s pockets, China’s tactics could be fairly thought of as “reverse-Delianism,” after the Delian League formed by the Greek city-states to counter the Persians after Plataea (479 BC). In its early days, the League was full of lofty words—freedom, independence—but by 454 BC, the association looked suspiciously like an Athenian Empire, with subscriptions morphing into tributes. Today, China is chucking gold left, right and centre so that, if parts slip out of line, their financial oxygen can be withdrawn.


 

Henry Hopwood-Phillips is a Byzantine historian, travel-guide hack(er) and book reviewer. Follow him on Twitter @byzantinepower or at Excvbitor (www.excvbitor.com) for jottings.