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Ports Under Heaven

China’s Strategic Maritime Infrastructure in the Indo-Pacific

May 3, 2018|By Devin Thorne & Ben SpevackPhoto credit: MIKE CLARKE/AFP/Getty Images

The Belt and Road Initiative (BRI)—Beijing’s $1 trillion infrastructure program that includes the Maritime Silk Road—has caused waves in the international community. Chinese firms have pledged billions of dollars to develop maritime ports and related projects across the Indo-Pacific, bringing much needed public goods to developing nations. At the same time, increasing Chinese military presence in the region and recurring accusations of economic coercion have caused international onlookers to question the BRI’s underlying motives.

In spite of the central role of maritime security in Chinese strategy, official BRI and Maritime Silk Road policy documents very rarely discuss the security implications or potential geostrategic rationales of the Initiative. Addressing concerns over ulterior motives, Chinese officials explain that the Initiative’s only goals are promoting “mutually beneficial and win-win” economic development, “with the core aim of strengthening economic cooperation and promoting common development through infrastructure and across-the-board interconnectivity.”

Claims that the BRI is strategically motivated are dismissed by Chinese statesmen as revealing a biased “Cold War mentality.” Yet the same views that Beijing decries as paranoid are espoused in the analyses of Chinese strategists. Writings in unofficial yet authoritative, state- and Communist Party- affiliated publications illuminate ongoing debates within China on the BRI’s strategic utility. Chinese strategists routinely prioritize using infrastructure investments to achieve China’s national security interests over the publicly stated objective of mutually beneficial economic development.

Chinese strategists and military personnel argue that investment in maritime ports and related infrastructure, including those of the BRI, can—and should—be used to:

Generate political influence: “China should promote regional cooperation and provide public goods to regional countries… to make relevant countries believe China’s benevolence” —PLA Navy Naval Research Institute (2014)

Stealthily expand China’s military presence:“Wherever there is Chinese business, warships will have a transportation support point” —Commanding officer of a PLAN warship (2016)

Create an advantageous strategic environment for Beijing: “Make these ports gradually possess the capability for offering logistical support to Chinese vessels and become China’s strategic support points in Southeast Asia to create an advantageous external environment for China’s rise” —Chinese Academy of Social Sciences (2015)

Open source and on-the-ground analysis of 15 China-funded Indo-Pacific port projects, as well as the behavior of the companies involved, suggests these investments are not principally driven by the concept of win-win development as Beijing claims. Instead, they exhibit six characteristics, which together suggest that the goals and strategies proposed by Chinese analysts are being adopted across the Indo-Pacific:

Strategic Location – China’s port projects are all arrayed along vital sea lanes, maritime chokepoints, and energy intake points in the region, with multiple projects being attempted around the most crucial locations.

Dual-Use Model – China’s port investments incorporate the “Ports-Parks-City” development model, which promotes industrial build-up, including factories and other infrastructure that could potentially be used to provide logistical support to Chinese military operations.

Communist Party Presence – Chinese government and Communist Party presence in ports through state-owned enterprises and the United Front Work Department ensures that China can assert political influence over port operations.

Financial Control – Chinese companies actively pursue equity stakes and long-term leases, often holding majority stakes and 99-year leases over their ports. This further bolsters China’s influence in recipient countries after infrastructure projects are completed.

Limited Transparency & Unequal Benefits – Beijing’s infrastructure deals are marked by limited transparency, which raises the risks of corrupt, illegal, and unequal deals that benefit China over the recipient country.

Unprofitability – Although some of China’s ports are potentially lucrative, others are patently unprofitable, underscoring the possible existence of ulterior motives to win-win economic development.

Diving deep into three of China’s port deals—those in Pakistan, Sri Lanka, and Cambodia—provides further evidence of China’s geopolitical maneuvering and the implications for recipient countries.

Pakistan: The BRI, specifically the China-Pakistan Economic Corridor (CPEC), has visibly changed the strategic relationship between China and Pakistan. Continued inflows of Chinese investment and labor into volatile territories such as Baluchistan have created liabilities that Beijing is addressing in an increasingly hands-on manner:

China has had direct negotiations with Baluchistan rebels since 2013China is increasing its marine forces, in part for deployment in Gwadar PortIn 2018, China’s Minister of Defense statedthat China is ready to directly provide security guarantees to CPEC projects

These activities highlight the inherent connection between economic initiatives and security operations, as well as the cost imposed by the latter on both China and the recipient country. Since 2013, when China took over Gwadar and first announced the BRI, there has been a clear escalatory trend toward Chinese boots on the ground.

Sri Lanka: Through repeated investments in vanity projects, China has accumulated substantial financial leverage over Sri Lanka. Outstanding debt obligations restrict Colombo’s policy options, preventing a shift away from increasing Chinese investment and precipitating the debt-for-equity swap of Hambantota Port.

When Hambantota was conceded to China Merchants Group Ports Holding Company (CM Ports), the Sri Lankan government stated that Colombo would retain a majority stake in the company managing security for the port—Hambantota International Port Services (HIPS). However, a portion of the capital invested in HIPS by the government of Sri Lanka was allegedly provided by a company ultimately owned by CM Ports, giving the latter de facto control over the security of the port.

Cambodia: In an apparent violation of Cambodian law, corporate obfuscation helped China broker a deal with Phnom Penh for 20 percent of Cambodia’s coastline. Cambodian law stipulates that land concessions cannot exceed 10,000 hectares; however, in 2008, one private Chinese company—Tianjin Union Development Group (UDG)—was awarded a 36,000-hectare concession. With the exception of a $1 million down payment, UDG has used the land for the past 10 years free of charge.

Although the deal was ostensibly struck between Cambodian authorities and a Cambodian-registered business, corporate records show that UDG was behind the deal from its inception. Local residents have been forced from the concession, and those who have refused to leave have reportedly been threatened.

Thus, a close look at the characteristics of China’s deals and the behavior of Chinese companies suggests that BRI port projects in the Indo-Pacific are not bringing about “win-win” economic prosperity as officially stated. Rather, these investments are generating political leverage, increasing Beijing’s military presence, and reshaping the strategic operating environment in China’s favor—often at the expense of the recipient country. Based on the strategic characteristics of Chinese investments, the authors derive an analytical framework that can be applied to assess the geostrategic implications of Chinese infrastructure investments around the world.

This article was derived from Harbored Ambitions: How China’s Port Investments are Strategically Reshaping the Indo-Pacific, which was produced by the authors for the Center for Advanced Defense Studies (C4ADS). The authors are China analysts with C4ADS.

https://reconnectingasia.csis.org/analysis/entries/ports-under-heaven/

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