Behind the maze of shipping ‘superhighways,’ stretching from the Indian Ocean to the South China Sea and beyond to the Pacific, will be a network of ports.
At least 15 to be precise, dotted around strategically vital regions and crucial to China’s grandiose US$8 trillion Belt and Road Initiative.
Rolled out in a fanfare of hype by President Xi Jinping in 2013, this massive construction program has become an extension of Beijing’s global ambitions and the centerpiece of its economic foreign policy.
It has also raised growing concerns about debt and security issues during the past two years, which have been highlighted in numerous academic reports, including Harbored Ambitions: How China’s Port Investments Are Strategically Reshaping the Indo-Pacific.
The 68-page document has captured the dark undercurrent which flows through this building boom.
“Over the last decade, China has significantly increased its global investments, particularly in international and maritime infrastructure,” authors Devin Thorne and Ben Spevack pointed out in the report for the Center for Advanced Defense Studies, or C4ADS, a nonprofit Washington-based think tank.
“Chinese firms have pledged billions of dollars to develop maritime ports and related projects across the Indo-Pacific Region … Yet, some states question whether China’s infrastructure investments are driven by strategic interests?” they continued.
“Chinese analysts unofficially discussing port investments routinely prioritize China’s national security interests over the objective of mutually beneficial economic development, contradicting the position of official policy documents,” Thorne and Spevack added.
In “official” terms, these new land and maritime ‘Silk Roads’ will connect the world’s second-largest economy with 68 countries and 4.4 billion people across Asia, Africa, the Middle East and Europe in a labyrinth of multi-trillion-dollar infrastructure projects.
Yet before the C4ADS report was released, there were rumblings of looming “sovereign debt risks” lurking in the background of the planned “$8 trillion network of transportation, energy and telecommunications infrastructure” developments, the Center for Global Development, another nonprofit Washington-based think tank, argued.
The 15 Beijing-funded ports scheme has simply reinforced those anxieties while underlining the national security aspects of the program as China increases military and, in particular, naval spending.
Political influence
“The characteristics of China-funded commercial ports throughout the Indo-Pacific and the behavior of Chinese companies indicate that these investments are not principally driven by the concept of ‘win-win’ development as Beijing claims,” the C4ADS report stated.
“Rather, the investments appear to generate political influence, stealthily expand China’s military presence, and create an advantageous strategic environment in the region,” it added.
The full scale of the project, which arcs from Yemen to the Maldives, Sri Lanka, Pakistan and Bangladesh while crisscrossing the South China Sea through Cambodia, Myanmar, Indonesia, Malaysia, Singapore and even the Philippines, has immense ramifications.
At the core of this coastal development drive is the vital shipping artery of the Straits of Malacca, and Beijing’s move to secure “key waterways.”
Almost “80% of China’s imported oil passed through the Indian Ocean and the Malacca Strait into the South China Sea in 2016,” the C4ADS report confirmed. Beijing, it continued, believes “itself vulnerable to foreign interdiction of vital energy supply lines.”
In the 2013 edition of The Science of Military Strategy, which was published by the Academy of Military Science and illustrates the nation’s naval doctrine, passages underscored “China’s feeling of maritime insecurity.”
“A 2015 article from a journal run by China’s University of International Relations, a feeder school for China’s intelligence agencies, [expressed] a similar idea. The author of this article [described] a concept of ‘first civilian, later military’,” the report said.
“Under this paradigm, commercial ports would be built with the goal of slowly developing them into ‘strategic support points’ that can ‘assist China in defending maritime channel security and grasp[ing] key waterways’.”
These claims are regularly dismissed by Beijing, insisting the ‘New Silk Roads’ are grounded in economic development, which will benefit countries involved in the Belt and Road project.
Still, what cannot be denied are the looming “debt risks.”
In a report entitled Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective, the Center for Global Development singled out 23 countries that could be prone to “debt distress.”
Of the group, Pakistan, Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan were rated in the “high risk” category.
“Belt and Road provides something that countries desperately want – financing for infrastructure,” John Hurley, a visiting fellow at the Center for Global Development and co-author of the study along with Scott Morris and Gailyn Portelance, said in a statement. “But when it comes to this type of lending, there can be too much of a good thing.”
This was brought into sharp focus when Sri Lanka announced in December that it would hand over control of the Hambantota Port, which was financed by loans, to China Merchants Port Holdings, a state-owned enterprise.
The country is in the “Group of 23,” while the 99-year lease deal with China enraged Sri Lankan government critics for threatening the nation’s sovereignty.
“The price being paid for reducing the China debt could prove more costly than the debt burden Sri Lanka seeks to reduce,” N. Sathiya Moorthy, a senior fellow specializing in Sri Lanka at the Observer Research Foundation in New Dehli, said.
While the Center for Global Development study acknowledged that the Belt and Road Initiative was “unlikely to cause a systemic debt problem” throughout the ‘New Silk Roads,’ it still “significantly increased the risk of a sovereign debt default” in a number of countries.
Pakistan, the report claimed, was “by far the largest nation at high risk,” estimating that China is financing around $50 billion in infrastructure and energy projects.
These include Gwadar Port, which is one of several major developments in the region that make up the China-Pakistan Economic Corridor. “Adding to Pakistan’s risk are the relatively high-interest rates being charged by China,” the Center for Global Development warned.
Haunting statement
Ashraf Mahmood, the then governor of the State Bank of Pakistan, delivered a haunting statement back in 2015. Perplexed by Chinese investment pouring into the country, he confessed: “I don’t know out of the $46 billion how much is debt, how much is equity and how much is in kind.”
As the C4ADS report emphasized, this “limited transparency not only obstructs researchers, it can also blind policymakers in recipient countries.”
But then, the development of Gwadar Port and other infrastructure projects have fueled “Beijing’s expanding involvement in Pakistan’s internal security environment,” authors Thorne and Spevack said.
“That China’s investments in Indo-Pacific ports may be driven more by Beijing’s national security interests than its claimed desire to encourage development in the region is best underscored by the real, or projected, unprofitability of several of China’s port projects,” they stated.
“Admittedly, an accurate comparison of China’s ports based on profitability is difficult. This is because the projects are in various stages of development or are expansions of existing international ports,” Thorne and Spevack went on to say.
“Of the 15 sample ports, six are arguably or potentially profitable, including Darwin Port in Australia, Doraleh Multipurpose Port in Djibouti, and the Port of Tanjun Priok in Indonesia,” they added.
Certainly, this ties in with the overall theme of China’s “strategic interests” and “security” concerns, as well as its growing carrier presence in the South and East China Seas, and the Taiwan Strait.
After stepping down earlier this week as the commander of the United States Pacific Command to become the next ambassador to South Korea, Admiral Harry Harris spelt out the hard facts of a shifting geopolitical landscape.
“China remains our biggest long-term challenge,” he said. “Without focused involvement and engagement by the United States and our allies and partners, China will realize its dream of hegemony in Asia.”
With the help, of course, of these ports in a storm.