Money and muscle pave China's way to global power

Chinese surveyors at the future site of the central business district in Cairo, Egypt, on Aug 9, 2018.
Chinese surveyors at the future site of the central business district in Cairo, Egypt, on Aug 9, 2018.PHOTO: NYTIMES

CAIRO (NYTIMES) - Under a merciless sun, a dozen Chinese construction workers survey an empty expanse of desert, preparing to transform it into the heart of a new Egyptian capital.

The workers are employed by China's largest construction conglomerate through a US$3 billion (S$4.1 billion) contract from an Egyptian company, with financing from Chinese banks. They are erecting a thicket of 21 skyscrapers, one as tall as the Empire State Building.

The presence of Chinese labour and largesse on the sands of Egypt is a testament to China's global aspirations. After centuries of weakness and isolation, China is reclaiming what its leaders regard as its natural destiny - supremacy in Asia, and respect around the planet.

Through the ventures in Egypt and elsewhere, China is exploiting its formidable economic clout to expand its geopolitical influence, directing investment to woo governments that control vital assets.

A traditional ally of the United States, Egypt controls the Suez Canal, a vital shipping passage where a threat to access could impede China's movement around the globe.

In constructing a central piece of the futuristic capital, China is ingratiating itself with the canal's ultimate gatekeeper, President Abdel-Fattah el-Sissi, while rendering his grandest visions dependent on friendly relations with Beijing.

China's reach for commercial expansion along with diplomatic influence guides an array of Chinese undertakings, from rail networks and highways taking shape across Africa and Latin America to ports and power stations being constructed in Eastern Europe and South Asia.

In South-east Asia, Chinese entrepreneurs are engineering a crop of Web companies just as China projects growing military power in the South China Sea.

Little more than a decade ago, China's forays beyond its borders were mainly about bringing home energy, minerals and other resources, often from countries forsaken by the West as pariah states like Iran, Sudan and Myanmar.

 
 
 
 

In foreign policy, China pursued a sole obsession - peeling off diplomatic recognition of Taiwan, the self-governing island that Beijing claims as its territory. Even as China skirmished with neighbours over contested islands, it accepted the dominance of the US Navy.

Those days are over.

Under the muscular leadership of President Xi Jinping, China has cast off previous restraints, rejecting deference to a US-dominated global order as an impediment to national revival. In matters of commerce and national security, China is competing with the United States, even in traditional American spheres of influence.

From a Chinese perspective, this reordering is merely an overdue reversion to historical reality as Beijing demands consideration commensurate with its stature.

In the telling of the ruling Communist Party, China's modern history is the story of Chinese mastery degraded by colonial depravity.

China is the land that invented the compass, gunpowder, paper and printing, amassing stupendous wealth while Europe was still backward. Then came centuries of humiliation - Britain's profiting from forcing opium on the populace, Japanese brutality, demeaning lectures about human rights from hypocritical Americans.

Now, China is intent on securing its own fate.

"China wants to be a great power in the world," said Dr Paul Heer, a former chief national intelligence officer in East Asia for the United States, who now teaches at George Washington University. "They think the rest of the world owes them recognition, and a return to what the Chinese see as their rightful place."

Nowhere are China's designs clearer than in Asia. China has overtaken the US as the leading trading partner with Asian nations while pushing back against American naval primacy in the South China Sea. China is disrupting American alliances in the region, from Japan to Singapore to Australia.

Beyond its backyard, China's ambitions are boundless. It celebrates its Belt and Road Initiative, a vast collection of infrastructure projects around the world, as the means of recreating the Silk Road, the trails navigated in ancient times by merchants carrying goods between Asia and Europe.

"Xi Jinping is leading a China that has influences in all corners of the globe," said Dr Zhang Baohui, a professor of international relations at Lingnan University in Hong Kong. "The 2008 financial crisis in the West was the turning point for China. Beijing started to embrace a triumphal mindset, and pursued global leadership with new confidence on the back of the West's perceived flaws."

China's assertive role in world affairs is grounded in its domestic needs. It is at once spreading into new markets, generating fresh demand for its factory wares just as growth slows at home. It is projecting military strength and influence when the legitimacy of the Communist Party rests on bolstering economic fortunes and international esteem.

THREATENING COMPETITION AND COHESION

If the new Silk Road is in part about moving goods from Chinese factories to customers in the rest of the world, the trail seems certain to pass through Central and Eastern Europe.

Already, Chinese investment has turned the Greek port of Piraeus into the busiest shipping hub on the Mediterranean, a gateway to the rest of the European Union, with its 500 million consumers.

China has promised to help finance the construction of a high-speed rail link from the Serbian capital, Belgrade, to the Hungarian capital, Budapest. It has also pledged to turn the region into a transportation corridor laced with highways, airports, rail, ports and power stations.

This reality frames the proceedings of the "16-plus-1" group, an economic bloc that China has forged with 16 Central and Eastern European nations. Its latest summit convened on a drizzly day in July in the Bulgarian capital, Sofia. Officials from the 16 governments - among them the newest, least-affluent members of the European Union - posed for photos with the delegation from China, the one nation wealthy and ambitious enough to finance their visions.

Leaders in the rest of the European Union construe the group as a stealth assault on the rules and cohesion of their bloc. In offering financing for infrastructure projects, China has positioned itself as an alternative to EU development funds.

Europe's money comes with rules protecting labour and the environment, while requiring that projects be awarded to companies on the basis of competitive bidding to ensure fair competition. China tends to distribute its funds with far simpler demands: Chinese companies must gain work, free of competition, while Beijing secures an international ally.

EU officials are especially worried that Chinese money could weaken the pressure Europe is applying on members that have been breaching democratic norms. Europe has threatened to withhold development funds from Poland and Hungary as punishment for their turns towards authoritarianism. Both have packed courts with government-friendly judges and menaced the press.

"It's a mutually beneficial cooperation based on mutual trust without any kind of attempts to interfere into domestic issues," Hungary's Foreign Minister Peter Szijjarto said in an interview before the summit in Sofia.

Bulgaria has high hopes for Chinese investment on highway projects linking its ports. The Bulgarian government has broken with other EU members in declining to join international statements condemning China's human rights record. As Bulgarian officials prepared at the gathering to meet China's premier Li Keqiang, they planned to stick to business.

"We are talking about different conversations, concrete conversations related to infrastructure, and other conversations related to the level of democracy and human rights in China," Deputy Prime Minister Tomislav Donchev of Bulgaria said in an interview the day before the event. "It would not be polite and constructive if we try to merge them into one."

INVESTING FOR THE FUTURE

As a currency crisis ravaged Indonesia two decades ago, angry mobs tore through West Jakarta, killing hundreds of ethnically Chinese merchants. Yet Mr Cheng Tao, a Chinese software engineer turned venture capitalist, can look down from his high-rise office on the same neighbourhood and see a tranquil centre of Chinese life - grocery shops, restaurants and his own son's school.

Mr Cheng, 34, is part of an influx of young Chinese financiers, engineers and Web designers who rent space in an area full of technology companies. He first came to Indonesia a decade ago with the Chinese telecom company Huawei. He and other veterans of large Chinese conglomerates are increasingly unleashing their own startups.

"Ten years ago, there were no mainland Chinese here," Mr Cheng said as he sips tea imported from China. "We see opportunities here that no longer exist in China."

The thriving Chinese startup scene in a neighbourhood once devastated by anti-Chinese terrorism illustrates China's deepening engagement in South-east Asia. Only a few years ago, Chinese companies in the region were mainly focused on purchasing natural resources. Today, China is investing for the future, seeding innovative industries with money and brainpower.

 
 

Last year, Chinese investors participated in funding rounds for Indonesian startups that accounted for 95 per cent of the value of those companies, according to a survey by Google and A.T. Kearney, a global management company.

"China is Indonesia's Silicon Valley," said Mr Adrian Li, a venture capitalist who has a Stanford MBA and moved to Jakarta from Beijing in 2014.

As China charts its global reach, six zones demand special attention: the maritime choke points.

The entryway to the Black Sea from the Mediterranean. The passageway from the Pacific to the Indian Ocean via the Strait of Malacca. The corridor separating Europe from Africa at the Strait of Gibraltar. Bab el Mandeb, off Djibouti in the Horn of Africa. The Strait of Hormuz in the Persian Gulf. Access to the Mediterranean from the Red Sea through the Suez Canal.

At any one, an outbreak of hostilities could imperil China's free movement around the globe, jeopardising its exports and access to resources.

These zones have historically been policed by US naval power, which has made China's access dependent on peaceful relations with the US. To liberate itself, China has been lavishing investment on governments that control the choke points.

Which is how China became financier and developer for the grandiose capital being constructed by President El-Sissi in the reddish-brown desert east of Cairo. Mr El-Sissi craves investment and allies at a time when much of the world has recoiled from his brutal crackdown on dissent.

In an interview, General Ahmed Zaki Abdeen, who heads the Egyptian state-owned company overseeing the new capital, railed against US reluctance to invest in his country.

"Stop talking to us about human rights," he said. "Come and do business with us. The Chinese are coming - they are seeking win-win situations. Welcome to the Chinese."