Within the state capitalism practiced by China, its investments abroad are not only commercial, but also geostrategic. As the most populous country in the world and second world power after four decades of unstoppable growth, has an insatiable appetite for raw materials and natural resources to keep fueling its progress. In addition to the usual oil, natural gas and coal, China needs the minerals used in new technologies, such as cobalt and copper, because of its ambition to lead the industries of the 21st century and not depend on the West. Less rare earths, of which the world’s largest reserves hold 35 percent of stocks, it needs everything.
Absorbing more than 25 percent of world production, the Asian giant imports minerals every year worth 100,000 million euros (84,500 million euros). These include 30 percent of world zinc production and 25 percent of copper. At 95,000 tons, it is the largest importer of cobalt, used in the lithium batteries that carry mobile phones, laptops and electric cars, which are already shaping up to be the most flourishing industry of the century.
Along with manganese, platinum and mercury, but also gold, silver and wood, all these resources abound in developing countries in Africa, Latin America and Asia where Beijing already has broad economic and geostrategic interests. Under the umbrella of its New Silk Road (‘The Belt and the Road’, according to the name of Chinese propaganda), the entire planet is developingn hundreds of multi-million dollar projects of infrastructure construction to promote trade. Since the beginning of this century, when the strategy of Chinese companies to go abroad began, the formula is always the same: in exchange for the resources that a country has, Beijing grants it loans for infrastructures, such as roads, dams, airports, schools and hospitals, built by Chinese companies themselves.
“The reason is that China does not trust the market to continue fueling its economic growth, which is based on its urbanization process and being the ‘factory of the world’, and prefers to go directly to the source. As natural resources are strategic to ensure the development of the Chinese economy, its companies they ensure these projects and, in addition, in this way they become global players and give way to their overproduction ”, the journalist Juan Pablo Cardenal analyzes for ABC. A veteran correspondent in Asia, Cardenal has studied the international expansion of the eastern colossus on the spot in books such as ‘The Silent Chinese Conquest’.
Corruption in Africa
Good proof of this is its presence in Africa, Latin America and Asia, where it is displacing the United States and the European Union (EU) in key industries. Although the data about your investments they are always confusingLike everything in China, the American Enterprise Institute (AEI) estimates that, since 2005, Beijing has allocated more than two trillion dollars (1.6 trillion euros) to construction projects abroad. In its file, called China Investment Global Tracker and accessible on the internet, it documents 4,000 large contracts in energy, transport, technology and other sectors since that year, but it must be clarified that some of them did not end up succeeding. Only in mineral projects, one of its priorities, its investment amounts to 155,300 million dollars (131,282 million euros) since 2005.
Especially notable were his operations in sub-Saharan Africa, where, according to the AidData research center, it allocated between 2000 and 2012 more than 16,000 million dollars (13,500 million euros) to the energy sector. With 41 percent of projects, it was ahead of the EU (18 percent: $ 7 billion / € 5.9 billion) and the US ($ 500 million / € 422 million).
Through its large state-owned companies, the authoritarian Beijing regime has no qualms about signing contracts that would not pass Western audits, which sometimes ends in complaints of corruption, environmental impact and labor or child exploitation. “In places where Western companies do not dare to invest because they are dangerous, China enters with all its state capitalism because it is about strategic operations,” says Cardenal.
Credits to America
China began its new relationship with Latin America through trade and public credit. At present it is the first commercial partner of almost all of South America, as well as Panama and Cuba. USA still maintains commercial primacy in most of its immediate surroundings (Central America and the Caribbean), but the fact that in recent years several countries in the area have broken their relations with Taiwan to open an embassy in Beijing heralds their intensification of relations with China.
Since 2005, major Chinese state banks have lent to Latin American governments about 140,000 million of dollars, well above the credits of international organizations. Almost half, 62.2 billion dollars, went to Venezuela; Brazil, Ecuador and Argentina follow the list of main beneficiaries.
These credits were for the purchase of oil in the future, facilitate the entry of the big Chinese oil companies in the hydrocarbon-producing countries, build road infrastructures and expand ports. Works made by Chinese companies and many times with Chinese employees. Increased trade and port infrastructures led China to also take over the management of entire ports or terminals. Thus, it manages the ports in Panama (in the two mouths of the Canal), Brazil, Peru, Cuba, Jamaica and the Bahamas.
Since 2017, China has stopped emphasizing the granting of credit to governments and the direct presence of its large companies to seek greater penetration by investing in the acquisition of local companies and thus access more mining concessions or enter services such as the distribution of electricity, gas and water. In this way, it has acquired several hydroelectric plants in Brazil and electricity traders in Chile and Peru. It has also bought niobium, phosphate and iron mining companies in Brazil, copper in Peru and gold and silver in Argentina, and in Chile it has entered the lithium business.
China’s exploitation of raw materials in Latin America has drawn criticism for its damage to the environment, as in the case of oil exploitation in the Amazon area of Ecuador or the illegal fishing that Chinese fishing fleets carry out in the Galapagos area and off the waters of Argentina in search of the giant squid.
In European countries, China has been interested above all in the control of the seas. Its main infrastructure is the Greek port of Piraeus, bought in 2016 by the super-ship Cosco, which in turn belongs to Beijing. It also owns 90 percent of the sole container manager from the Belgian port of Zeebrugge, which is strategically located next to the megaports of Antwerp and Rotterdam. There, the Chinese shipping companies own ownership interests in the main operators -25 percent in Antwerp and 35 percent in Rotterdam-, in addition to being minority shareholders in those of Bilbao, Valencia or Las Palmas, among others.
However, in recent years Chinese investments in Europe have suffered a sharp slowdown and have returned to the levels of ten years ago, of around 6,500 million. Fears that their companies would take advantage of the pandemic to buy out troubled Europeans have not materialized. Above all, for two reasons: the health situation has also affected Chinese companies and the investments of the Asian giant are subject to much greater scrutiny from European governments. In fact, the European Commission passed a directive limiting the inflow of non-European capital into critical assets. Furthermore, at least fourteen of the twenty-seven EU member states increased their mechanisms of discrimination against Chinese investments, which has blocked several major acquisitions.