China does not do charity23.04.2020
I will begin by saying that everything that is happening right now and everything that is still to come has already happened. The only difference is that the occurrences taking place at this moment have assumed a more modern shape.
With this I mean that what is now often considered a breakthrough or an innovation is actually something developed long ago, only now it is dressed in a new understanding and wrapped in new technology to fit the current era.
China is a country with an ancient past that preserves and follows its traditions, and for this reason one can try to understand China’s actions by viewing them through the prism of history.
Most of the world is familiar with Sun Tzu, the Chinese general, strategist and philosopher who lived either in the 6th or 4th century BC. It was due to Sun Tzu’s victories that his country grew more powerful. When he retired, he wrote the military treatise The Art of War, which is one of the most popular pieces on politics and strategy.1
I am more than certain that the Chinese ruling elite, including heads of different services, have read Sun Tzu’s work. Therefore, we can find many cornerstones of China’s behavior in the writings of Sun Tzu.
He writes: Therefore, one who is skilled in warfare principles subdues the enemy without doing battle, takes the enemy’s walled city without attacking, and overthrows the enemy quickly, without protracted warfare. His aim must be to take All-Under-Heaven intact. Therefore, weapons will not be blunted, and gains will be intact. These are the principles of planning attacks.
If some time ago the notion of “the art of war” could only be imagined in the context of an armed battle, then now countries try to reach their goals by sending diplomatic and financial means to the battlefield. We can look at it this way: at one time in our history it was possible to seize power over a city or country using force; now, however, it can be done with financial instruments. There are numerous ways to do this – from the most basic ones such as bribes, to more refined ones like investments, grants and loans. Thus, the more primitive method of war that uses weapons is being replaced by a more elaborate battle, the main weapon in which is MONEY.
And I don’t mean the cheap bribery cases. The reality is much more complex, and initially no one even dares to suspect the true intentions of their “benefactor”.
One of the largest players taking part in this game is China.
Over the last two decades, China has become the largest global lender, with outstanding claims exceeding 5% of global GDP. In total, the Chinese government and its companies have handed out 1.5 trillion USD in direct loans and trade credits to more than 150 countries. This has turned China into the largest creditor in the world, surpassing such organizations as the World Bank, the International Monetary Fund or all of the OECD creditor governments combined. It should be noted that many of these Chinese loans are secured, meaning that the loan is repaid from revenue gained, for instance, from exports. Numerous countries already owe China at least 20% of their nominal GDP (Djibouti, Tonga, the Maldives, Congo, Kyrgyzstan, Cambodia, Niger, Laos, Zambia, Samoa, Vanuatu and Mongolia).2 The “loan diplomacy” actively employed by China in recent years is aimed at gaining political influence in “vulnerable” countries in the Asia-Pacific region.3
It is most likely that China would not mind if other nations in its sphere of interests would also express enthusiasm for large loans or grants, because then it would only be a matter of time until China calls the shots in these countries.
Luckily, most countries can resist the temptation to acquire such easy money. We can draw parallels with mortgage loans or the short-term loan business. It is easy and fulfilling to borrow money, but when the time comes to return the money, then…Of course, China will be very friendly and flexible during the talks concerning the repayment of the loan. If you are unable to return the money, we could decrease the sum or even write off the loan, but for us to do this we will ask you to do this and that. What exactly can China ask for – the possibilities are endless: starting with more lucrative conditions in mutual trade or international lobbying, and ending with the long-term rent of specific objects.
However, I already said that most countries don’t want anything to do with China’s primitive loans, but this doesn’t mean China intends to cease. Instead, China has decided to take a relatively longer road for achieving its goals, and this road is the most dangerous, but also quite steady and effective – investments.
China has now invested in several mega-projects. I will name only a few:
Pakistan has seen large investments: for instance, 46 billion USD were used to transform Pakistan’s transportation and electric networks. The Karachi nuclear project K2/K3 is mainly funded by the Chinese state-owned Exim Bank which transferred over 6.6. billion USD in three payment stages.
The transport infrastructure in Ethiopia also received investments. This is most visible in the country’s capital Addis Ababa, where China sponsored a large part of transport projects, from new bypass roads to the first metro system in Sub-Saharan Africa.
From 2000 to 2017, Sri Lanka, a country in serious debt, received more than 12 billion USD from China in the form of loans or grants. Until 2017, the government of Sri Lanka was burdened by the loans of the previous administration. The Hambantota port project, which concluded in 2011, was funded by the Chinese government that hired a state-owned company to carry out the construction of the port employing mainly Chinese workers. After months of negotiations, the port was commissioned along with the surrounding land that was leased to China for 99 years. This illustrates the true intentions of China, which has now acquired a port in the direct vicinity of India for a couple of years.4
China has been studied extensively, and it has been concluded that the main concerns are caused by the situation in Pakistan and Sri Lanka, where China’s “loan diplomacy” has reached a level where the governments of these countries are forced to hand over their strategic objects to China, for example, ports or military bases.5
Belarus signed an agreement with the Shanghai branch of the China Development Bank in late 2019 on receiving a loan of 450 million euros. This loan is not intended for a particular project and can be used for different purposes, including repaying government debt, maintaining Belarus’ gold and currency reserves and furthering trade between Belarus and China.6
One of the largest projects, however, is the famous Belt and Road Initiative (BRI) which is a global development strategy adopted by China in 2013 that foresees infrastructure developments and investments in at least 70 countries and international organizations in Asia, Europe and Asia.
The Chinese government says the initiative “is aimed at improving regional compatibility and supporting a brighter future”. Some observers see it as Chinese dominance in global affairs by exploiting its trade network. The project is expected to conclude in 2049, which happens to coincide with the 100th anniversary of the People’s Republic of China.7
Presently, China has signed cooperation agreements concerning the BRI with 138 nations and 30 international organizations.
Looking at the intentions of China8, there are no questions about who intends to become the biggest global player. The list of countries engaged in China’s project is quite extensive, so I will name only some: Poland, Greece, Portugal, Italy, Austria, Luxemburg, Switzerland, Armenia, Azerbaijan, Russia, etc. If we look at the geographical coverage, the expected construction works will take place in Africa, Europe and Asia.
The Baltic states are not directly engaged in the BRI project, but this doesn’t mean that China is not interested in furthering its influence in the region, as the Baltic states are members of the EU and NATO and somewhat able to affect the decisions made by this organizations. Therefore, we can’t say that China has completely excluded the Baltic nations, including Latvia, but it should be noted that by looking at the amount of investments received we are not China’s main concern, not even close.
In 2016, China expressed interest in investing in the railway project Rail Baltica9, but the interest did not manifest in actual funding. But it is not completely true to say that China has lost interest in the project. In March 2019, head of Rail Baltica business development Kaspars Briškens confirmed that “there is actually significant interest from the Chinese side.”
Now, China is considered one of the world’s leaders in developing high-speed rail technologies. “Rail Baltica commercialization plans could foresee attracting Chinese cargo flows in the future, including attracting Chinese investment for the development of logistics and cargo handling infrastructure,” Briškens commented.
China’s investment activities in other countries, for instance, the construction of logistics centers in Poland and Belarus signal of its wishes to receive additional privileges. Most often, these privileges manifest as the requirement of allowing Chinese workers into the country.10 This backs the assumption that Chinese investments and other types of assistance are not based on mere unselfishness and willingness to help.
On the first glance it may seem that that’s no big of a deal – let the Chinese themselves do the construction. We should remember Soviet times, where one of the USSR’s deliberate strategies was to overflow the republics with large masses of foreigners. For example, in 1935 63% of the residents of Riga were Latvians, but in 1996 this dropped to 38%.11 In the late eighties, the idea of bringing 10,000 construction workers to construct a metro was the decisive factor that made the public protest against it. As I have already expressed, China is the ideological brother of the USSR. China is well aware that in the long-term it is necessary to station as many of its citizens as possible in a territory it is interested in. In addition, the more Chinese people there are in a particular territory, the greater the freedom of Chinese secret services to act there. This brings us back to Sun Tzu’s writings: In war, there is nothing more important that espionage. None should be more liberally rewarded as spies. In no other business should greater secrecy be preserved.
Spies cannot be usefully employed without a certain intuitive sagacity. They cannot be properly managed without benevolence and straightforwardness. Without subtle ingenuity of mind, one cannot make certain of the truth of their reports. Be subtle! be subtle! and use your spies for every kind of business.
I think you would agree that it would be naïve to assume China is not employing its secret services to further its own ends. It would also be foolish to think that all Chinese workers are only mere workers.
Therefore, I would say that for now it is actually a good thing that the Baltic states have not come under China’s radar, because considering the greediness and susceptibility of people and China’s modus operandi, it wouldn’t take long until some political parties would begin chanting that Chinese communism isn’t Russian communism and that we need to expand cooperation with this nation.
It is well known that China has mastered numerous ways of getting what it wants. As I said previously, this ranges from simple loans and grants to different types of investment. And to stimulate the process, China invites influential people to different meeting in China, covers the transportation and accommodation costs and, of course, never forgets about gifts.
Lithuanian intelligence services have also concluded that: “With growing Chinese economic and political ambitions in Lithuania and other NATO and EU member states, the activities of Chinese security services are becoming increasingly aggressive.”12
We can now do a comparison of two countries. Just like Russia, China too has a single goal – to strengthen its geopolitical influence. Both countries have bloated ambitions, but when it comes to resources China is already far ahead of Russia. And, unlike the aggressive approach of Russia which only yields results in the short-term, China’s tactics are much more covert and deeper and the resources available to it are much greater.
I will conclude my thoughts with another grain of wisdom from Sun Tzu: He who lacks foresight and underestimates his enemy will surely be captured by him.
Zintis Znotiņš (Latvia) specially for International Center for Countering Russian Propaganda