China, a reality check

February 24, 2015

Learning lessons the hard way
China has been over time attempting to spread its influence to all parts of
the globe using its economic power. A history of perceived abuse and
exploitation by the imperialist colonial powers going back to the Opium
Wars fuels this drive.
Analysts claim that in 2011 China was the worlds sixth largest international
investor. However, in the real politic world of international intrigue and the
evolution of democratic political reality in certain critical parts of the world,
China has recently come in for some shocks.
Take Lanka. Lankans are well aware of the strong influence China has had
over Lankas economic development; going back to the time of the Rubber
Rice Pact in the time of the aftermath of the Korean War, through a mixture
of grants, soft and commercial loans, China is involved in a large number of
infrastructure development projects in all parts of Lanka.

Politically too China has shown the intention of asserting herself. Some time

ago the Chinese Ambassador in Lanka met with the leaders of the Tamil
National Alliance shortly after the TNA team had returned from India after a
series of meetings. The TNA team has told the newspapers that the
meeting was at the express request of the Chinese Ambassador. The TNA
stated that they had covered a lot of ground in discussions with the
Ambassador, including the visit of the TNA delegation to India.
Sri Lanka
The recent election of President Sirisena has been seen as a shock to China.
Chinas seemingly-generous, lavish and profitable financing of projects in
Lanka was seen as some commentators as a way of ensuring the reelection of former incumbent Rajapaksa.
China probably underestimated the resentment among Lankans to the high
interest rates on some Chinese loans for projects and the questionability as
to whether these were truly Lankan priority projects or Chinese priority
projects imposed on Lanka.
Interventions such as the Hambantota Port with berths pre-allocated to
China, visits of Chinese submarines and warships to the Colombo South Port
and the land reclamation in the sea off the City of Colombo, in which a
Chinese Government-owned corporate entry has been granted a secure
extent of land, contrary to the existing legal regime on foreigners owning
land in this Wonder of Asia, are deals regarding which there has been
criticism within Lanka.
It is interesting to see where China will be in two decades time. Will the
Exceptionalists carry the day and will China end up being a seething pot of
nationalist hate, bent on taking revenge from the world, for the past
injustices imposed on China by the imperialist powers? Or will the
Universalists win through and, will China end up a rich and affluent, extralarge size XL Singapore Inc., with warlike intentions only being manifested
in corporate board rooms? Non-Chinese planners project that China in 20
years will be a near peer power bumping up against the United States of
America in terms of economic and military capability, having aggressive
intentions with its neighbours and nation states which do not do Chinas
bidding

Indeed, as soon as the new President took over, there were calls for these
projects to be scrapped. But a quick visit by a Chinese Government Special
Representative combined with a reality check on the Lanka side on the dire
state of the economy, and the negative effect on other foreign investors if
the Chinese were summarily kicked out, has resulted in a more rational
review being called for, especially on aspects of due process being
followed.
China would note that President Sirisenas first foreign visit was to India.
Prime Minister Wickremesinghe has gone on record saying that

the
previous Rajapaksa administration tried to play China
against India and India against China. Prime Minister Modi has declared to
President Sirisena that our security and prosperity are indivisible. The two
leaders also planned a visit to Colombo by Modi around March. But the
Foreign Ministry in Colombo is also said to be planning a visit by Foreign
Minister Samaraweera to China soon.
A frustrated Indian External Affairs South Block Babu has been quoted in
the newspapers saying: I hope Im wrong, I really do. But increasingly what
we are seeing carries the shades of what weve already seen under
Rajapaksa, not anything different and new.
The Indo Lanka Civil Nuclear Agreement will also be a new pie in the sky in
this extremely convoluted triangular relationship!

Japan
China is expanding its sphere of influence in all parts of Asia. There is an
ongoing dispute over some rocky outcrops in the South China Sea, the
Scarborough Shoals. The row between Japan and China over five islets that
lie between them resurfaced again recently, when the Japanese
Government decided to buy the three islands it does not already own from
their private owner.
China reacted with outrage and sent two naval patrol boats to waters near
to the islets, which the Japanese call Sneak and the Chinese call Diary. A
Chinese newspaper the Global Times went as far as to question Japanese
sovereignty over the prefecture of Okinawa! The dispute borders around
both countries Exclusive Economic Zones, in terms of the Law of the Sea
Convention, ratified in 1982.

Pakistan
Pakistan is a particularly relevant case in point. From the time of Pakistan
helping Secretary of State Henry Kissinger and President Nixon to pierce the
seemingly-impenetrable Bamboo Curtain and normalise relations with the
Peoples Republic of China, Pakistan has been a target of US largesse.
In addition, China has made Pakistan a central part of its plan to for a
network of ports, pipelines, roads, and railways that will facilitate Chinas
exports to the rest of the world and bring in raw material and gas and oil
from Africa and West Asia.
The String of Pearls (the CIA label) or the Maritime Silk Route (which Chinas
President Xi prefers), whichever way you label it, gives Pakistan a key role.
But China is growing increasingly squeamish about the dangers of Islamic
terrorism emanating from Pakistan.
When the outgoing all-powerful Commander of Pakistans Army, General
Kayani, was paying his valedictory visit to Beijing in October 2013, three
Chinese of Muslim Uighur ethnicity took a car packed with explosives and
blew it up in Beijings heart, Tiananmen Square, on the day before General
Kayani was due to fly into Beijing. In December 2014, when terrorists killed
130 Pakistani school children in Peshawar, China sent swift condolences and
utterly condemned the atrocity.
The Chinese complain loudly that the Pakistani authorities do not do

enough to destroy havens of the East Turkestan Islamic Movement, a

Chinese Uighur ethnic separatist group, operating out of Pakistan, working
in Chinas western Xinjiang region. Experts say: China has a good
understanding of almost everything in Pakistan, political, security or
economic, that might affect their bilateral relationship, but there is one
piece that they just dont get Islam.

Myanmar, Tibet, India

On the Asian mainland, other than Pakistan, China is extremely conscious of
the potential effect of the democratisation of Myanmar, until then a virtual
Chinese pocket borough under the Burmese military, promoted by the
ASEAN nations and the effect Western liberal democratic nations may have
on the region.
Internal unrest in Tibet, fuelled by a spate of recent self-immolations, and
an ongoing dispute with India over the Indian state of Arunachal Pradesh, is
also internal and international political issues. The Indian Army is raising a
number of new mountain divisions to station on the border with China and
in Latah.
2012 was the 50th anniversary of the 1962 invasion of India by the Peoples
Liberation Army of China; there is resurgence in India, among the media
especially, on the 1962 episode, where the PLA advanced into India, gave
the Indian Army a bloody nose and pulled back into China.
It is reported that Deng Hsiao Ping, visiting the United States, had
mentioned to President Jimmy Carter that China, which was having a border
dispute with Viet-Nam at that time, would teach Viet-Nam also a lesson, in
the manner China taught India a lesson in 1962. True to form, the PLA
advanced across the China-Viet-Nam border shortly thereafter, although the
battle-hardened Vietnamese veterans of the Viet Nam war against the USA
put up a spirited defence, unlike the ill-prepared, ill-equipped and badly-led
India forces in 1962.
US President Barak Osama being Indian Prime Minister Narendra Modes
guest at the recent Indian National Day celebrations is another prick in
Chinas eye.

Russia and Mongolia

To the North, relations with Russia seem stable for now, notwithstanding
Vladimir Putins antics in Ukraine and a history of border dispute. With
Mongolia, China has ongoing issues over access to Mongolias humongous
mineral wealth, which Chinese-owned State and corporate entities are
eyeing.

Freedom of the seas

The freedom of the seas also has become an issue to China, with over 70%
of its raw materials and oil and gas coming through the southern seas and
the Straits of Malacca. One Chinese leader referred to this as Chinas
Malacca Dilemma.
The Chinese also have deployed naval assets to assist the international
policing operation against Somali pirates off the coast of East Africa, mainly
in self-interest, to protect their shipping routes. The first Chinese aircraft
carrier is undergoing sea trials, a futile deterrent to the USAs aircraft
carrier groups based in the Pacific.
The Chinese interest in the political unrest in the Maldives Islamic Republic
is also said to be based on the fear of the possibility of Islamic
fundamentalist pirates locating themselves on an uninhabited Maldivian
atoll and preying on ships carrying raw material to China across the
southern seas.

Africa
In Africa too, China is increasing her influence. Access to raw materials is
one reason. In addition, Chinese business people are involved in agriculture,
animal husbandry and mining. In Zambia recently there was a shooting
incident, where it was alleged that Chinese managers of a copper mine had
opened fire at demonstrating workers.
A recent crackdown in Ghana over illegal mining in the gold rich nation
resulted in the death of a Chinese miner and sparked a protest from China,
underscoring the challenges of growing Chinese investment in African
mining. Ghanaian officials say the growing presence of Chinese miners has
become a real national challenge as small-scale illegal mining by both

Chinese and Ghanaians has spread across the country.

China has lavished development aid to many countries on the African
continent. In Ghana, China has built the National Theatre in Accra, the
capital city, and also wrote off the loans that paid for the construction costs.
Recently it constructed as a gift a state-of-the-art conference hall to the
Ethiopian capital of Addis Ababa, but there was a small pinprick channel
one on the interpreters sound system was Mandarin!
Chinese investment in development assistance to Africa exceeds that of the
World Bank, with no annoying conditionalities on human rights and
freedoms, etc. In Kenya too massive infrastructure investments have not
earned China a good name. Criticism abounds that China is merely
indulging a in a neo-Colonial exercise of extracting Kenyan raw material and
export finished goods to Kenya, a yellow imperialism aping the white
imperialism of yesteryear.

Confusion in Beijing
In other parts of the world a vote to end austerity in Greece, plunging in
commodity prices blowing a hole in Mexicos finances have caused
confusion in Beijing. Two projects, a port privatisation in Greece and highspeed rail contract in Mexico, came a cropper recently.
Greece because, like the Chinese Communist Party (!), the Greeks newlyelected Syriza party asserted that strategic infrastructure should remain in
Government hands. In Mexico a lucrative high-speed rail contract was shot
down due to concerns of due process of unsolicited single bidder China.
China has lent Venezuela $ 50 billion since 2007; Venezuelans openly
question whether they can ever repay this! Argentina, which is in trouble
because of a commodity prices crash, is drawing on Chinese credit to
empower its currency reserves. Chinese banks have lent more than $ 30
billion to Putins Russia.
A senior Chinese Communist party official , has been quoted as saying:
These incidents have not been very pleasant, we have accumulated more
outward investments but still lack experience in dealing with the political
consequences of this economic activity! A difference from the Ugly
American Uncle Sam, the British Bulldog and other powerful nations, who
have much more experience in interacting with the developing world and

their rulers.

Attempt to win friends and influence people

But China is not giving up its attempt to win friends and influence people.
In July 2014 it set up the BRICS Bank, partnering Brazil, Russia, India and
South Africa, labelling it the New Development Bank, a ghost World Bank,
with a capital of $ 50 billion.
In October 2014 China led the creation of the $ 100 billion Asian
Infrastructure Development Bank, a challenge to the Asian Development
Bank. In November 2014 China announced a $ 40 billion donation to the
Silk Road Fund, to be managed by another Chinese-backed development
bank.
Remember the Maritime Silk Road a.k.a. the String of Pearls? This is all pure
mercantilism as Yu Yongdin, one-time advisor to Chinas Central Bank, has
said: Business is business. The move to set up Chinese-led new
multilateral development banks is an admission that the hitherto unilateral
approach is not working.
Chinas economy has been growing at double digit rates over the last few
years, although just now there is a slowdown due to the collapse in the
European and America economies.

Annually around September the Hurun Report is published in Shanghai by a

luxury publishing and events group; it is a compilation of Chinas wealthiest
people. The report reflects important trends in the Chinese economy. A
recent version of the report reveals that Zong Quinghou, a drinks tycoon
who owns the Wahaha Group, regained the top spot he had occupied in
2010. His closest rival was Wang Jianlin of the Dalian Wanda Group, a
property developer. The report discloses that manufacturing has displaced
property development as the leading source of wealth for the 1,000 people
listed.
What is of special interest is that two of those listed, media entrepreneur
Yang Lan and Pan Shiyi, a property developer, are the most popular micro
bloggers on the list, with more than 10 million followers each on the
internet. Seven of the listed members have been named as delegates to

the 18th Communist Party Congress to be held on 6 November.

These are the Red Capitalists whom the Communist Party of China is
assiduously cultivating, successful businessmen who also are enrolled into
the Communist Party and given positions to give capitalism a Chinese
communist face.

Learning to be a great power

Zhu Feng, an international affairs expert at Beijing University has said: We
are the 800-pound gorilla in the room. China is learning to be a great
power.
Teufel Dreyer, a Professor at the University of Miami, says, of China: There
is a debate at the top. Some leaders assert that China must assert its
interests in a more straightforward way, to get its hands on resources it
needs to power its economy. Others say the country must continue to give
priority to domestic development and solving internal social challenges.
Recently, Red Princeling and former Chairman of a State-owned company,
Qin Xiao, now heading an independent think tank the Boyuan Foundation
made a speech at one of Chinas most prestigious universities, Tsinghua,
accusing the party hierarchy of replacing the enlightened values of
democracy, freedom and individual rights with Chinese ones such as
stability of the status quo and the interests of the State being paramount.
Qin founded the Boyuan Foundation in 2007, together with investment
banker and Red Princeling He Di, saying that China needs someone to
stand up and speak. Quin in an interview with a newspaper published in
Guangdong Province, the Southern Peoples Weekly, said: The Arab Spring
showed that no matter how well a countrys economy performed, people
will not accept dictatorial, corrupt government. Also Wang Changjian, a
scholar at Communist Partys training academy for cadres, has pointed out
that there seems to be a phobia against political reform.

Battle lines are clearly drawn

In China the battle lines are clearly drawn between the Universalists, who
believe China must eventually converge on democratic norms, and the
Exceptionalists, who believe that China must preserve and perfect its

authoritarianism.
While Qin and the Boyuan Foundation represent the Universalists, Zhang
Weiwei represents the Exceptionalists. Zhang recently wrote Chinas
evolution should be as if the Roman empire had never collapsed and had
survived to this day, turning itself into a modern state with a central
government and modern economy, combining all sorts of traditional
cultures into one body with everyone speaking Latin.
This Exceptionalist point of view, which is a confluence of nationalism,
rapidly-growing military capability and deeply-held feelings of victimhood
are worrying. However, Chinese officials keep articulating the need for a
Harmonious World and decry the use of military force to resolve disputes.

It is interesting to see where China will be in two decades time. Will the
Exceptionalists carry the day and will China end up being a seething pot of
nationalist hate, bent on taking revenge from the world, for the past
injustices imposed on China by the imperialist powers? Or will the
Universalists win through and, will China end up a rich and affluent, extralarge size XL Singapore Inc., with warlike intentions only being manifested
in corporate board rooms?
Non-Chinese planners project that China in 20 years will be a near peer
power bumping up against the United States of America in terms of
economic and military capability, having aggressive intentions with its
neighbours and nation states which do not do Chinas bidding. China is in
its new avatar of using its financial clout for imperial, military and economic
expansion in the world and is in the process is learning some hard lessons.
These are reflected by similar developments at home. Economic growth is
slowing; an ageing population is also slowing things down, more than
metaphorically! The Chinese Communist Partys tradition of the top cadre
standing down and being replaced every 10 years in an orderly manner will
definitely come under democratic stresses.
The old Chinese curse may you live in interesting times is going to be the
case for the rest of the world, while China steers its way through these
pitfalls, while at the same trying to stand up and play a dominant role in
world politics.
(The writer is a lawyer, who has over 30 years of experience as a CEO in

both State and private sectors. He retired from the office of Secretary,
Ministry of Finance and currently is the Managing Director of the Sri Lanka
Business Development Centre.)
Posted by Thavam