China’s Economic Empire

Source: New York Times, 6.2.13                                                  Hit to enlarge.

Heriberto Araújo and Juan Pablo Cardenal, authors of China’s Silent Army: The Pioneers, Traders, Fixers and Workers Who Are Remaking The World in Beijing’s Image, have digested their findings into a significant New York Times article. Stripped to its bare-bones essence, Araújo and Cardenal are suggesting China is taking over the world economically, in the manner Japan had seemed to threaten to do in the 1980s:

• By buying companies, exploiting natural resources, building infrastructure and giving loans worldwide, China is pursuing economic domination, its essentially unlimited financial resources threatening to obliterate any Western firm competitive edge, to kill jobs, and to blunt criticism of China’s human rights abuses. 

• Using over a billion Chinese savers’ forced deposits, China Inc. is able to control oil and gas pipelines from Turkmenistan to China, from South Sudan to the Red Sea, from the Indian Ocean to Kunming via Myanmar, and from Siberia to northern China, while undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan, Ecuador’s Coca Codo Sinclair Dam, and 200+ other dams across the planet (see chart). 

• China is the world’s leading exporter; it surpassed the United States as the world’s biggest trading nation in 2012, it is the leading trading partner of Australia, Brazil and Chile as it pursues iron ore, soybeans and copper, buying natural resources and food, ensuring that China’s urbanization and its exports acquire needed resources. 

• China’s annual investment in the European Union grew from less than $1 billion annually before 2008 to over $10 billion in 2012 (33% of China’s foreign direct investment), and in the United States, from under $1 billion in 2008 to $6.7 billion in 2012. 

• China’s foreign direct investment is projected to reach as much as $1 trillion to $2 trillion by 2020; China currently manages Greece’s main cargo terminal in Piraeus, has a 10% stake in London’s Heathrow, is the main foreign investor in Portugal’s power-generation sector, and owns 7% of France’s Eutelsat. 

• Neither Germany, which accounts for nearly half of the European Union’s exports to China, nor the European Union itself, are unlikely to force China into leveling the playing field or guaranteeing trade reciprocity, even as China buys Volvo and German equipment manufacturer Putzmeister. 

• China is the biggest investor in Germany in terms of the number of deals, looking for companies like Putzmeister with world leadership in niche markets, enabling China to absorb Western know-how on branding, marketing, distribution and customer relations. 

• Greenland, controlled by Denmark, last year passed legislation to allow into the region Chinese workers who earn less than the local minimum wage, so that China can undertake the costly exploitation of Greenland’s mining resources; Greenland’s leaders believing its exploitation might never occur without Chinese involvement. 

• The U.S. seems an exception, pushing a Trans-Pacific Partnership apparently to contain China by restricting membership to countries that support free competition, labor and environmental standards and intellectual property rights, and it has refused contracts to Chinese telecom giant Huawei. 

• In Canada, Obama’s refusal to approve the Keystone pipeline has caused Prime Minister Stephen Harper to turn to China, including construction of a pipeline through British Columbia despite environmental group opposition, and facilitating China’s $15.1 billion takeover of Canadian energy giant Nexen, even as closer economic ties have reduced Canadian criticism of China’s human rights record, a 180-degree turn given that Canada used to attack fiercely China’s handling of dissidents. 

• Chinese accumulated investment in Australia by 2012 surpassed $50 billion, increasing 21% from 2011, and while Australia’s trade portfolio remains diversified, China’s share is growing rapidly. 

• Chinese loans are even more significant in dollar terms than direct foreign investment, providing billions to countries to acquire Chinese goods, finance Chinese-built infrastructure, and start projects in the extractive and other industries; between 2009 and 2010, China was the world’s largest lender, doling out $110 billion, more than the World Bank. 

• Chinese loans are crucial in countries facing Western or UN loan cutoffs, countries like Angola, Ecuador, Venezuela, Turkmenistan, Sudan and Iran, where China steps in without political or ethical strings attached.