China’s Overseas Investments Come with Baggage
There are strings
While China’s huge overseas investment plans continue to attract attention from developed and developing countries alike, equally important is the skepticism prevailing about the profitability of these investments. They do not come merely as “investments” in the strict sense of the term.
Certain repercussions follow, ranging from transfer of ownership of assets to potential political problems. Although such issues are not typical of China’s investments only, these issues acquire a lot of significance when seen against the context of the country’s overt emphasis on “non-interference.”
Part of this skepticism owes its existence to China’s slowing growth and consequent questions regarding its own ability to fund projects such as the high speed rail network, a central pillar for the revival of the ancient Silk-Road route.
While China may not be inclined to intervene directly into other states’ affairs, the investment plans themselves carry a lot of political baggage. Take, for instance, the case of China-Pakistan Economic Corridor. The numbers only are dazzling in terms of the potential benefits Pakistan would be able to reap. However, huge numbers do not in themselves translate into concrete socio-political benefits. With China making huge investment, part of the plan requires a significant increase in militarization of certain regions, especially Balochistan wherein a separatist movement is going on for almost a decade.
Pakistani sources say the government will place almost 60,000 additional troops in Balochistan to ensure protection of China’s silk road. This increased militarization is certainly going to add fuel to the fire. One of the most important demands the Baloch separatists have made for engaging in dialogue is demilitarization. Placement of additional troops to protect China’s interests therefore runs counter to resolution of the ethno-national conflict.
A lot of scepticism, therefore, continues to prevail in Pakistan regarding the officially sponsored narrative that development would lead to resolution of the conflict. The Baloch separatists do not believe development will lead to their emancipation. It is for them a step towards increasing state control over their resources and eventual displacement and dispossession.
Part of the scepticism prevailing in Pakistan, as in many other countries, is due to China’s own slow economic growth, says economist Aitzaz Jamil. While Chinese officials continue to assure the target countries that slow economic growth won’t have a negative impact China’s economic commitments, China’s own officials acknowledged in the first week of March that it faced tough battle to keep world’s No.2 economy growing by at least 6.5 percent over the next five years while pushing hard to create more jobs and restructure state-owned enterprises.
Notwithstanding the skepticism, China continues to promise development to developing states. One of the primary beneficiaries, as it stands, happens to be Central Asia, which accounts for a huge chunk of China’s energy imports. It is not, however, merely imports that are significant. In Kazakhstan, Chinese companies own somewhere between one-fifth and one-quarter of the country’s oil production — about the same proportion as the national oil company, putting China’s stakes at par with the state’s own interests.
Is that a conflict of interest? At times, yes. Because China owns assets in the target countries doesn’t always necessarily mean that China actually bought those assets. Ownership aften stems from a policy that aims at forcing the target countries to play by China’s financial rules, which can be onerous. Many developing countries, in exchange for loans, pay steep interest rates and give up the rights to their natural resources for years. China has a lock on nearly 90 percent of Ecuador’s oil exports, which mostly go to paying off its loans.