Newsletter 1/May 2021

China, Geopolitics, and the Global South

CONTENTS: Blog posts: Europe’s geopolitical ghost ride in the Indo-Pacific / “Debt diplomacy” as a popular refrain in the intensifying debate about China’s economic and political expansion // Readings: A new book on ‘how a former socialist country rescues world capitalism’ / Jonathan Hillman, ‘The Emperor’s New Road’ / Study on ‘social risks to sustainable development’ in China’s BRI.

Blog posts

Indo-Pacific: Europe’s geopolitical ghost ride. April 2021

It may sound like a matter of routine: In the summer of this year, the German frigate Bayern is about to set sail and spend several months cruising in the Indian Ocean and the Western Pacific.  The Defence Ministry merely wants to see this as a „signal“: Where Germany’s „values and interests are at stake“, its flag is to be shown. However, behind this there is a fundamental restructuring of security policy, in other words, a paradigm shift. Europe seeks to „learn the language of power,“ as former Defence Minister Ursula von der Leyen called for in the summer of 2019. And it is a provocation that was immediately answered by Beijing: The pro-government Global Times writes sardonically, „if they can come to the South China Sea, we can also go to the Mediterranean“.

Auf Deutsch: Deutschland im Indopazifik: Die Logik der Eskalation.

My borrowers, your borrowers. May 2021

The label of “debt diplomacy” is a popular refrain in the intensifying debate about China’s economic and political expansion. The narrative is simplistic: Lending by state-owned banks, it is said, is not transparent, would encourage corruption, and would primarily serve Chinese corporations. It would lead inevitably to a debt trap, to a policy of coercion and even to “debt bondage,” according to the German business weekly Wirtschaftswoche at the beginning of May. The beam in one’s own eye is overlooked. This gives the impression that Beijing’s policy is far more ruthless than the practice of international financial institutions like the IMF, governments of Western industrialized countries or large commercial banks.

Auf Deutsch: Meine Schuldner, deine Schuldner.


Anton Stengl, Chinas neuer Imperialismus

Is contemporary China communist, socialist, or indeed capitalist? And if so, how much so? For Anton Stengl, who intends “to analyse and criticize China without working with clichés, longstanding prejudices and the usual propaganda”, it is clear: China has undergone a fundamental systemic change since the Mao era and is today a capitalist market economy, even an imperialist superpower. He regards the Belt and Road Initiative, which reminds him of Western colonialism, as proof for this. For him, the global promotion of private business expansion by the state and the party is an essential foundation of China’s economic superiority. But the undeniable economic, social and technological successes are achieved at the expense of workers and peasants, who have been exploited, even “forgotten”, in favour of a consumption-obsessed “middle class” society. Naturally, Western capital feels increasingly under threat by the new competition from the Far East. But despite all its successes, the Chinese growth system is also at risk of a structural crisis that would drag the capitalist world economic order into the abyss as well.

Anton Stengl, Chinas neuer Imperialismus. Ein ehemals sozialistisches Land rettet das kapitalistische Weltsystem. Promedia 2021

Jonathan E. Hillman, The Emperor’s New Road

Jonathan Hillman too sees China on its way to empire building with the New Silk Roads. And he also considers China’s trajectory of success to be susceptible to crisis, albeit not because of the “tendency of the inevitably declining rate of profit,” as Stengl argues, but because “Xi may be overreaching”. In a combination of travel reports, some of which, however, date back three or four years, and analysis, he elaborates on this threat by looking at the situation in 16 countries, from Eastern Europe to Russia and Central Asia, Pakistan and Sri Lanka to Southeast Asia, with a side step to East Africa. Like Stengl, he believes China is retracing in the footsteps of colonial powers, especially because he identifies stronger military ambitions than Stangl.

But Beijing has a harder time than Western colonial powers: It has to be welcomed in by its hosts and meet their high aspirations. Too, it is constrained by international norms, which did not apply when Western corporations and governments advanced their notions of “development optimism” in the post-World War II decades. In his travels, he has found many uncompleted construction sites, such as the Khorgos Gateway container terminal with attached economic zone on the Chinese border with Kazakhstan, or along the CPEC, which connects the western Chinese province of Xinjiang with the Pakistani port of Gwadar. The stories provide an impressive array of failures, corruption cases, ‘white elephants’, severe environmental damage, and distrust of the Chinese intentions among government and ordinary people alike. Often recipient countries have their own priorities, which do not necessarily coincide with Xi’s version of the BRI, nor with notions of an equitable, sustainable and ecological development.

Hillman thus illustrates the extent to which China’s BRI is dependent on consent and domestic political conditions in the recipient countries. As a consequence, renegotiations became necessary, project costs had to be reduced, and debts forgiven. In response to a diverse range of opposition, the Chinese PR machinery and soft diplomacy had to be stepped up, and in some cases security precautions had to be taken by private security services. In addition, Hillman emphasizes the crucial problem that both state-owned corporations and private-sector companies have not marched lockstep to Beijing’s tune. They often have more influence on the ground than Chinese officials. Coupled with rising costs and shrinking revenues at home, this had already led to adjustments to the concept at the Second Belt and Road Forum in April 2019, and its rebranding as “open, green and clean cooperation.” The Corona pandemic exposed these multiple weaknesses further.

Nevertheless, for the West and for the EU in particular, BRI is dangerous, Hillman points out, if it fails to successfully implement counter-initiatives for the countries of the Global South, such as stepped-up development and infrastructure programs, thereby offering alternatives to Chinese investment and domestic growth perspectives.

Jonathan E. Hillman, The Emperor’s New Road. China and the Project of the Century. Yale University Press, 2020

Shawn Shieh, et al, Understanding and mitigating social risks to sustainable development in China’s BRI

This study, commissioned by the think tank Overseas Development Institute (ODI), concentrates on the impacts of BRI projects, on benefits, opportunities and risks, in two countries – Nepal and Zambia. Here some clippings from the Executive Summary:

„Chinese companies behave much like they do in China and, to a significant degree, like other foreign companies behave in BRI countries where governance is weaker. The social risks to sustainable development observed in these countries were largely an outgrowth of these companies as profit-maximisers, prioritising profit and market share over social and environmental risks.“

„The most important social risks to sustainable development identified in the fieldwork for this study were:
1) risks to rule of law and strong governance stemming from lack of transparency and information disclosure in financing and project agreements;
2) risks to health, the environment, gender equality and livelihoods stemming from lack of community consultation and grievance mechanisms;
3) risks to industry and innovation stemming from lack of local linkages and excessive importation of manufactured goods and labour;
4) risks to decent work stemming from low wages and substandard working conditions; and
5) risks stemming from language and cultural differences and insensitivities.“

„Host governments in Zambia and Nepal have good policies and laws on paper; the problem is that they lack the capacity and will to coordinate implementation and enforcement of those policies and laws.“

„There is a tremendous diversity of Chinese businesses in BRI countries. The Chinese government is unable to coordinate, let alone provide guidance and assistance to these companies. Chinese state-owned enterprises (SOEs) are significantly more aware of Chinese government policies and guidelines than their privately-owned counterparts (POEs), and SOE internal policies include more robust health, safety and environmental guidelines as a result. Yet the sheer scale and scope of these business activities mean that the Chinese government and lenders and investors need to do more to manage these risks, hold companies to higher Environmental, Social and Corporate Governance (ESG) standards and strengthen their capacity to engage with communities and civil society groups in the host country.“

„Chinese companies need to bear some of the responsibility for managing and mitigating these risks, but they are unlikely to do so without external pressure and support. Local and Chinese civil society organisations and trade unions will play an important role in monitoring the behaviour of lenders, investors and contractors, holding them accountable to higher ESG standards and engaging companies to improve their Corporate Social Responsibility (CSR) and community engagement strategies and practices.“

Shawn Shieh, Lowell Chow, Zhong Huang and Jinfei Yue, Understanding and mitigating social risks to sustainable development in China’s BRI. ODI, April 2021 (pdf)

Leave a Reply