June 13, 2024
World Economy

Chinese Port Power – Modern Diplomacy


China’s rise to prominence in the world economy during the last four decades has been fueled by rapid economic expansion, heightened involvement in international trade, and extensive global investment. This growth has changed the geopolitical and economic landscape in the area, raising questions about China’s intentions and apprehensions about its outreach programs. To improve connectivity across the region, the Silk Road Economic Belt and the 21st Century Maritime Silk Road were combined to form the Belt and Road Initiative (BRI), which was introduced in 2013. This program has sparked speculation regarding China’s strategic aims, timing, and site choices, triggering attitudes of both appreciation and skepticism.

Sea Lines of Communication (SLOC) depend heavily on ports, which serve as geopolitical instruments with the capacity to promote industrial growth, satisfy trade and energy demands, and strengthen naval capabilities. By increasing their economic footprint and political clout in the host nation, investing states can use overseas ports as vehicles of economic statecraft to promote their national agendas.

Considering ports are essential to both regional and global economies, acting as important channels for both international trade and the projection of geopolitical force, China’s growing investments in other ports have garnered a lot of attention. Questions regarding the centralization of global trade methods have been raised amid the aggregation of these significant assets in Chinese state-owned enterprises (SOEs).

Notably, major participants in these deals include China Shipping, China Merchants, and Cosco. The Chinese Overseas Ports database, an interactive visualization, offers information on the amount of Chinese ownership of foreign ports while taking investment kinds, geographical locations, and periods into account. Except for Antarctica, every continent has at least one port in which Chinese enterprises hold ownership or operating interests. The database comprises 101 port projects. Nine of these projects have ceased operations for a variety of reasons, such as political unrest, financial difficulties, security concerns, and environmental challenges. Of these, 92 are still ongoing. Beijing has also signed maritime agreements with 66 nations and areas; of the ongoing projects, 13 have large Chinese ownership, and ten include infrastructure that may be used in a military capacity.

Notably, some of these port projects have sparked doubts regarding the dual-use (commercial and military) prospect of these ports, raising fears about China’s possible geopolitical goal.

The Push Behind Overseas Port Investment

Economy

China has to expand internationally due to its steady economic growth and technical breakthroughs. Since the late 1970s, the Chinese government has made economic growth a top priority and a major policy, utilizing it as a vital tactic to preserve social stability and regime credibility. China became the “world factory” as a result of the reform and opening up era’s export-oriented industrialization route. The 2013 launch of the Belt and Road Initiative (BRI) highlighted the value of commerce in providing raw materials and bolstering infrastructure projects in Asia, Europe, and Africa. China’s overall strategy now revolves around the establishment and growth of economic ties through the BRI.

China’s Five-Year Plans (FYPs) show that the country’s economic goals go beyond meeting its immediate requirements. Long-term goals include transforming and innovating technology to upgrade the economic system. China’s economic agenda, which emphasizes technological innovation, market growth, and international competitiveness, is represented in projects like Made in China 2025.

Stable access to ports along key Sea Lines of Communication (SLOCs) is necessary to meet China’s growing demands for both inward and outward product shipping, which is in line with the country’s economic security. China has thus made investing in overseas ports a top priority for the twenty-first century. China plans to use outward port developments to create an efficient and well-coordinated transport-trade system, harnessing its dominant position in international shipping.

Energy

Securing energy commodities is another crucial goal for economic security. For China’s economy to grow, energy security is essential, and supply security is just as important as profit. China is currently pursuing a comprehensive energy security policy that encompasses marine, continental, worldwide, and indigenous aspects.

China is up against fierce competition for energy resources, especially in the Asia Pacific area, where the world’s oil consumption is highest. Since 1993, China’s oil output has exceeded its net imports, positioning it as the world’s top oil importer. China has expanded the sources of its oil imports, which it has historically sourced mostly from the Middle East and North Africa but now from Russia and Venezuela, to increase energy security. Diversification plans are further enhanced by investments, particularly under the BRI, in Central Asian republics. In these conditions, it is essential to provide various transportation routes for energy supply.

An Insight into the Chinese Overseas Port Investment Projects

The majority of port projects are in line with the three “blue economic passages” proposed by the National Development and Reform Commission, which link China to the Southern Pacific, the Mediterranean, Africa, the Indian Ocean, Australia, and Europe through the Arctic Ocean. Chinese investments in foreign ports are dominated by state-owned companies (SOEs), which are closely associated with the Communist Party apparatus. Two significant SOEs, China Shipping Corporation (COSCO) and China Merchants Group (CMG), are essential. While CMG focuses on developing markets, COSCO concentrates on industrialized nations and important international shipping lanes.

According to a 2020 Nikkei Asia study, Chinese corporations, such as COSCO and CMG, invested close to US$11 billion in 25 port developments spread across 18 countries between 2010 and 2019. China will be advantageously positioned by these investments to increase its global commerce and maritime infrastructure footprint.

Indian Ocean:

The Indian Ocean is regarded by the Chinese as a weak spot in terms of marine security. It is seen as an important region both strategically and economically, since it helps China move westward. Prominent ports such as Gwadar, Mombasa, Hambantota, Kyaupkyu, Malacca, and Chittagong are essential to China’s international commercial port developments, especially in the context of the Maritime Silk Road plan.

The fact that the Indian Ocean facilitates 80% of China’s energy imports and supports essential commerce operations highlights China’s interest in the region. Chinese investments in the area have increased dramatically over the last three decades, and ports are now major hubs for political, economic, and strategic initiatives.

The building and investment sectors for marine projects are dominated by Chinese state-owned companies (SOEs), particularly CMPorts and China Communication Building Company. All but one of the seventeen port developments in the IOR are linked to large Chinese state-owned enterprises (SOEs), such as China Communication Construction Company and CMPorts. One such location is the CSP Terminal at the Khalifa Port, which is close to Abu Dhabi. The $300 million investment made at the terminal by the Chinese shipping behemoth COSCO has made it a major hub for commerce along the Maritime Silk Road.

Beyond only building, China is also directly involved financially, with Chinese businesses owning holdings in a variety of projects, either through loan or equity agreements. For example, CMPorts, a company based in Hong Kong, has invested in the management of ports such as the Doraleh Multipurpose Port in Djibouti, while other Chinese enterprises have leased ports or terminals in Pakistan, Sri Lanka, Australia, and the United Arab Emirates under concession agreements. Concerns about nations being indebted to China are raised by situations like Hambantota, where debt relief was obtained in exchange for a strategic position.

Chinese enterprises exhibit a wider economic sway as they participate not only in port operations but also in the growth of free trade zones and industrial parks. The China Merchants Group is connecting the development of contemporary trade centres with the building of basic infrastructure by utilizing Shenzhen’s Shekou Industrial Zone as a pattern for port development BRI areas. One such instance is Port City in Colombo. Although Gwadar is an example of a greenfield project, Chinese businesses have also purchased stock in ports. For instance, in 2016, Abu Dhabi Ports and COSCO Shipping Ports Abu Dhabi Company agreed to a concession arrangement for the management of 90% of the port of Khalifa’s second phase container terminal. Thirdly, certain investments have management rights attached to them. One example of this is the port of Hambantota, which is under the control of CMG.

Concerns are also raised internationally about China’s military installations close to important seaports, including the Red Sea, the Persian Gulf, the Strait of Hormuz, and the Suez Canal.

Europe:

By the end of the month of August, 31 2023 container seaport terminals in Europe and the Mediterranean, ranging from Malta and Greece to Germany and Sweden, had received key investments from Chinese enterprises. Notably, these comprise important ports such as Valencia, Hamburg, and Rotterdam. Chinese corporations hold absolutely complete or substantial majority ownership of just two of these terminals, which are located in Zeebrugge, Belgium, and Piraeus, Greece.

With COSCO Shipping Ports (CSP) already owning stakes in eleven terminals spread across seven European nations, it is clear that China’s state players have increased their involvement in the port network of Europe since 2016. This includes more recent additions like the Tollerort terminal owned by HHLA. CSP’s financials show a significant increase in the amount of money that Chinese state-owned enterprises are investing in Europe. In 2022, European terminals accounted for 47% of CSP’s total income of US$682 million, a significant increase from 32% in 2016.

Apart from CSP, another state-owned company, China Merchants Port Holdings, has also made investments in nine terminals, with a special emphasis on ports in southern Europe, including those in France, Greece, Malta, Turkey, and the Netherlands. Remarkably, by the middle of 2023, China Merchants held 49% ownership in Terminal Link, a joint venture with CMA CGM, which oversaw its assets in Europe.

In  2023, there was a greater discussion over Chinese involvement in Europe’s transportation infrastructure, particularly in light of CSP’s proposal to purchase 35% of Hamburg’s Tollerort Terminal. Despite worries about possible Chinese dominance, as of the middle of 2023, Chinese state-owned companies controlled the majority or all of the authority at just two European ports: Zeebrugge and Piraeus.

Zeebrugge handles comparatively less traffic compared to Piraeus, which is a more substantial investment. COSCO SP has made vital expenditures on Piraeus, which will result in container volumes exceeding 5 million TEUs by 2022. The Belt and Road program includes the Chinese port developments, however, the EU’s concerns prompted the implementation of additional regulations in December 2022. Chinese influence critics raise worries about changes in trade flows, prospective opportunities for European port operations, the competitiveness of European ports, and undue pressure on European companies to sustain positive relations with China.

Notwithstanding these worries, China continued to be the EU’s biggest commercial partner in 2022, sending products worth €230 billion (US$247 billion) to the EU and coming in third for imports.

Security Concerns:

Chinese legislation blurs the boundaries between local and foreign authorities by requiring enterprises in the international transportation industry to support military activities. This creates concerns over Beijing’s power over international energy corridors, maritime lanes, and infrastructure projects. The 2017 law possibly jeopardizes national security by giving the Chinese government the legal authority to meddle in the affairs of foreign corporations. Furthermore, strategic geopolitical security concerns are heightened by investments at the ports of Khalifa (UAE), Port of Fujairah (UAE), and Duqm (Oman), particularly in proximity to the vital Strait of Hormuz.

Geopolitical Influence:

Chinese state-owned companies (SOEs) influence political choices in host nations by holding ownership holdings in various ports. Case studies illustrate situations in which changes in policy and diplomatic positions were impacted by Chinese funding. The main examples include COSCO’s growing involvement in Piraeus and rail infrastructure projects bolstering China’s supremacy in the eastern Mediterranean, and the Chinese investment in Piraeus, which is said to have persuaded Greece to loosen its position on port restrictions against Russia.

Espionage Risks and Data Access:

Espionage dangers arise from China’s control over port infrastructure and its data management systems. There are several benefits to being able to regulate logistical data and gather insight on international commerce activity. Unmatched access to international trade data is made possible by the extensive network of ports run by Chinese organizations, which also offers insights into trade trends and shipments. The dynamic of the issue has also altered with the implementation of the LOGINK System. 24 foreign ports have signed agreements to adopt LOGINK, which improves data management through China’s National Transportation and Logistics Public Information Platform.

Economic Coercion:

Beijing can threaten to cease operations in order to obtain concessions because of its economic clout stemming from its control of port assets. For states trying to strike a balance between political sovereignty and economic development, this dynamic poses a difficult problem. China has economic clout as a result of its ownership of port assets overseas, forcing host nations to balance their commercial and political autonomy. Furthermore, China has assets in 191 ports across 88 countries, raising fears in numerous Latin American countries regarding economic pressure.

Military Trap and Dual-Use Assets:

China poses particular threats to the host nations through its investments in dual-use assets, such as ports. The port states face difficulties due to the possibility of military engagement and conformity with Chinese fighting strategies. Funding under political pressure can result in oversupply, as in the case of Sri Lanka’s Hambantota Port, which puts a burden on finances and lowers performance. Authority over foreign ports also makes it possible for espionage and military usage, which can have an influence on geopolitical disputes and international security.

In conclusion, the geopolitical and economic environment has changed as a result of China’s advancement in the global economy, which is characterized by its strong economic development, widespread engagement in international commerce, and worldwide acquisitions.

China’s ascent is similar to that of its historical forebears, who have extended into outlying geopolitical areas as they rose to the position of great powers. China’s desire to obtain ports in strategically significant places is driven by its internal economic security demands, but its ability to engage and negotiate with other nations is limited by regional geopolitical institutions that are shaped by the leading powers and their shifting interests.

The examination of Chinese investments in Europe and the Indian Ocean highlights its aspirations for a worldwide maritime power. While European investments, particularly at Piraeus and Zeebrugge, show an increasing presence in important global commercial hubs, Chinese involvement in ports like Gwadar and Hambantota represents strategic interests in energy corridors in the Indian Ocean.

China’s maritime influence, however, brings with it challenges related to economic coercion, geopolitical ramifications, and security. Global stability and safety are threatened by the blending of military and civilian activity, the influence of Chinese state-owned businesses on the policies of host countries, the possibility of asset duplication for military use, and espionage hazards.



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