China's Silent Army
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32. At a press conference in Beijing in early 2011, Asgaroladi said that bilateral trade would reach $50 billion by 2015.
33. “Millionaire Mullahs,” Paul Klebnikov, Forbes Magazine, July 2003. According to this article, at that time Asadollah Asgaroladi had amassed a fortune worth $400 million.
34. In May 2011, a report by the UN Panel of Experts monitoring North Korea’s arms activity noted that Pyongyang was reportedly exchanging ballistic missile technology with Iran, which represents a violation of the Security Council’s sanctions. The same report indicated that illegal trade was being carried out via a “third country,” which the diplomats identified as China.
35. Testimony given before the US Congress by John Garver, an expert on Iran and professor at the Sam Nunn School of International Affairs, Georgia Institute of Technology, April 2011.
36. Interview with John Garver, June 2011.
37. In practice, China’s veiled defense of Iran along with the strategic importance that Beijing gives to its crude oil imports—of which Iran was their sixth largest supplier in the first quarter of 2012—have led Chinese oil companies to continue investing in the Iranian energy sector after other foreign companies have been forced to abandon their operations to avoid being sanctioned. As such, China represents a vital escape route for this most important sector in Iran’s economy. This subject will be explored in greater depth in Chapter 4.
38. According to the Stockholm International Peace Research Institute (SIPRI), in the years between 2005 and 2009 Iran was the second largest recipient of Chinese arms exports after Pakistan.
39. As well as enriched uranium for military use, a nuclear program with military goals requires a transporting agent: ballistic missiles. Iran has produced a prototype which could be operational by 2014 at the earliest. However, the United Kingdom has claimed that the Islamic Republic tested missiles capable of carrying nuclear warheads during military exercises in June 2010. Since the 1990s, China and other countries including Russia and North Korea have supplied Iran’s regime with the industrial infrastructure, teams, advice and know-how necessary for its development. Source: Interviews with experts including Michael Elleman, an expert in international security at the International Institute of Strategic Studies in Bahrain.
40. Furthermore, China has seen unquestionable returns on its decision not to support the unilateral sanctions imposed on Iran by the United States and Europe. “China does extremely well at identifying areas that are not covered by the UNSCR [United Nations Security Council Resolutions], such as expanded military trade, banking through China and other trade. Other countries have gone beyond the UNSCR. China has not.” By doing so, China has benefited from entering areas not covered by the sanctions, thereby “expanding trade and financial relations [with Iran],” says Aaron Dunne, an expert in arms control and non-proliferation at the Stockholm International Peace Research Institute (SIPRI).
41. On May 17, 2011, China blocked the publication of the UN report. The next day it officially denied involvement in any such trade. Word for word, the report warns that “Prohibited ballistic missile-related items are suspected to have been transferred between the Democratic People’s Republic of Korea [North Korea] and the Islamic Republic of Iran on regular scheduled flights of Air Koryo and Iran Air, with trans-shipment through a neighboring third country.”
The diplomat told the authors that “countries such as China and Russia have made a very important contribution to the trade between Iran and North Korea,” and assured them that the report offered ample evidence of this fact.
42. Hong Kong passed the new legislation a whole nine months after the approval of the UN sanctions. Hong Kong’s press raised concerns about the possibility that the legislation would be ineffective in dismantling the network of Iranian shipping companies in Hong Kong, whose ships are registered under the names of Hong Kongese companies. Source: “Uncertain Future in Hong Kong for Iranian Shipping Line,” South China Morning Post, Irene Jay Liu, March 30, 2011.
The island’s press has also reported on Hong Kong’s apparent state of apathy when it comes to carrying out thorough controls on exports, arguing that controls are less rigorous now than they were in the past. In 1997, not long before Hong Kong’s return to Chinese sovereignty, the Executive Council of Hong Kong shut down four companies suspected of supplying nuclear and military technology to Iran. Among them was the state-owned Norinco group, which re-emerged soon afterwards under a different name. In the fifteen years since the transfer to Chinese rule, Hong Kong’s local government has not acted against any more companies for this reason, demonstrating what appears to be a very different political sensibility.
43. The South China Morning Post described the trade in American technology to Iran via Hong Kong in “The Hong Kong Connection,” Irene Jay Liu, February 27, 2011.
44. However, Aaron Dunne, from the Stockholm International Peace Research Institute (SIPRI), told the authors that the difficulty in applying the sanctions should not be underestimated. “Because of the volume of trade, the nature of the information available to enforcement actors is very limited and … it is extremely difficult to identify consignments of concern at the border. Information is limited and the windows of opportunity to take action are also limited.” In this sense, he pointed out that “Hong Kong and Singapore are the two most advanced countries in the region in terms of sanctions implementation and export control.” Dunne also warned that the trade in dual-use technology to Iran originates in and passes through other countries as well as China.
45. Between 2002 and 2009, forty-seven Chinese companies were sanctioned a total of seventy-four times by the United States, according to John Garver, professor at the Sam Nunn School of International Affairs, Georgia Institute of Technology.
46. Wenzhou has become one of the wealthiest and most enterprising cities in China, with a private sector that is well known for its vitality. Dozens of entrepreneurs from the area visited Dubai in search of new opportunities, taking advantage of the collapse in housing prices in late 2009. Out of the 150,000 Chinese people who are said to live in Dubai, around 20,000 of them come from Wenzhou. Source: “Chinese Hunt for Bargains in Dubai,” Financial Times, January 18, 2010.
47. The authors have found that at least Laos (San Jiang Shopping Mall), Vietnam, Saudi Arabia (China Mart and Jeddah Chinese Commodity Center) and India (Chinese Commodity Center in Delhi) already have markets exclusively for Chinese products. Iraq, Russia and Jordan are currently planning projects of this type. Mexico is planning to open a replica of the Dragon Mart in Cancun in the near future which—at 840,000 square meters—will be five times the size of its Dubai counterpart. Thailand has scheduled the inauguration of the China City Complex in Bangkok for 2012, with an expected surface area of between 500,000 and 700,000 square meters.
Unlike the Dragon Mart, the property of the Emirati state-owned company Nakheel, these markets are usually controlled by Chinese entrepreneurs who, as seen in the case of Liu Desheng in Chapter 1, buy land, build the market and then hire out space to their compatriots. In this way, China conquers foreign markets not only through its capacity to produce merchandise cheaply and quickly, but also through the use of regional hubs or markets. These serve to distribute merchandise to remote places to which it would be logistically difficult or expensive to send products directly from China. One example provided by Nicolás de Pedro is Kyrgyzstan, where an estimated 75 percent of Chinese products imported by the country are destined to be re-exported (to Uzbekistan, Turkmenistan or Afghanistan). This represents the second most important economic activity in the Central Asian country.
Sources on Chinese markets: the authors’ own research and “Dragon Mart de Cancún estará operando en el 2012” [Cancun’s Dragon Mart to Open in 2012], Jesús Vázquez, El Economista (Mexico), March 22, 2011; on Kyrgyzstan: “El ascenso de China en Asia Central: ¿Un nuevo hegemón regional en gestación?,” op. cit.
48. The New Silk Road: How a Rising Arab World Is Turning
Away from the West and Re-discovering China, Ben Simpfendorfer (Palgrave Macmillan, 2009), p. 156.
49. Created in 1961, state-owned COSCO is the second largest shipping company in the world. It owns over 800 vessels and its activities cover 1,600 ports worldwide. Considered one of China’s best and most efficient state-owned companies, COSCO has played a fundamental role in the arrival of Chinese products throughout the world. On the one hand, the company’s expansion has allowed “Chinese products to be taken to every corner of the planet, and on the other hand it has secured strategic lines of communication, such as the oil route,” according to Kang Ronping, an expert in Chinese multinationals and adviser to the Beijing government. The interview with Professor Kang was used as a source here in the face of COSCO’s refusal to grant the authors an interview.
50. In 1963, after gaining independence from French rule, Algeria became the first country to receive a team of Chinese doctors as part of an aid package from Beijing. Since then, sending doctors abroad has become a feature of Chinese diplomacy, the country having sent more than 20,000 doctors, nurses and health professionals all over the world, most of them to Africa. It is estimated that Chinese doctors have treated around 240 million patients over the last forty-six years. Source: Chinese Medical Cooperation in Africa, Li Anshan (Nordic Africa Institute, 2011).
51. Between September 23 and September 26, 1991, groups of Zairian soldiers mutinied and began looting shops, factories and homes in Kinshasa and other important towns in the country. The soldiers, who were protesting after months of unpaid salaries, robbed everything that crossed their paths, dismantling factories and destroying shops. Soon afterwards the civilian population joined in with the looting. At least 117 people died as a result of these incidents, which mostly affected businesses owned by the country’s expat community.
52. Zhang Qi () is a descendant of Zhang Qian ( 1853–1926), a Chinese official and entrepreneur from the Jiangsu province well known for his business achievements in the textile industry. As well as obtaining the highest possible mark in the imperial exams, an achievement bringing great influence and status at the end of the Qing dynasty, Zhang set up over twenty businesses in the city of Nantong, most of them in the textile and education sectors. The best known of these businesses was Dasheng (), which was later expropriated by Mao’s Communist government. Sources: Encyclopedia of Contemporary Chinese Culture, Edward L. Davis (Routledge, 2005), p. 569; 2004.
53. This figure was released by the official agency Xinhua in 2007, and it is unlikely to be a true reflection of the real number of Chinese people living and working in the continent “for extended periods of time.” The actual figure is thought to be significantly higher.
54. “China in Africa: After the Gun and the Bible … a West African Perspective,” Adama Gaye, in China Returns to Africa: A Rising Power and a Continent Embrace, eds. Chris Alden, Daniel Large and Ricardo Soares de Oliveira (Hurst, 2008), p. 130.
55. “Mixed Fates of a Popular Minority: Chinese Migrants in Cape Verde,” Jorgen Carling and Heidi Ostbo Haugen, in China Returns to Africa: A Rising Power and a Continent Embrace, eds. Chris Alden, Daniel Large and Ricardo Soares de Oliveira (Hurst, 2008), p. 320.
56. In 2010 China overtook Germany to become the world’s biggest international exporter. China’s entrance into the WTO was a decisive milestone in the country’s expansion into foreign trade. In the words of Professor Kang Ronping, “there is no doubt that we have gained more than other countries by entering the WTO. This is particularly true if we take into account the data regarding exports and the market share won by Chinese businesses in sectors such as the manufacturing industry.” Nevertheless, Beijing has been criticized for its protectionist methods and for not fulfilling the commitment it made in 2001 to open some sectors of its economy, such as the service industry. For more information, see Chinese Trade Policy After (Almost) Ten Years in the WTO: A Post-crisis Stocktake, Sally Razeen (European Center for International Political Economy, 2011).
57. Evidence of this is provided by the fact that, with the exception of Canada, none of the other G7 countries (France, Germany, Italy, Japan, the United Kingdom and the United States), considered as representative of the world’s greatest industrialized economies, bases its economic policy on the production and exportation of natural resources.
58. When China Rules the World, op. cit., pp. 73–4.
59. The reports “The Impact of China on Sub-Saharan Africa,” Raphael Kaplinsky, Dorothy McCormick and Mike Morris, Institute of Development Studies, November 2007, and “The Growing Relationship Between China and Sub-Saharan Africa: Macroeconomic, Trade, Investment, and Aid Links,” Ali Zafar, World Bank Research Observer, 22 (1), Spring 2007, provide more information on this subject.
60. China and Latin America: Economic Relations in the Twenty-First Century, Rhys Jenkins and Enrique Dussel (Deutschen Institut für Entwicklungspolitik, 2009), p. 48, and “China’s Global Expansion and Latin America,” Rhys Jenkins, Latin American Studies, 42, 2010, p. 820.
61. Several experts agree that the rapid increase in salaries in the east of the country, where the bulk of Chinese industry is found, will eventually lead China to lose competitiveness in comparison with other countries such as Vietnam or Cambodia in industries which require a greater labor intensity. The Spanish economist and analyst Eduardo Morcillo of Interchina Consulting predicts that Chinese production costs will increase by between 300 and 400 percent over the next decade. On top of this there will be an eventual revaluation of the Chinese currency, the yuan, which Morcillo places at around 40 percent. However, in the short and medium term, the underdevelopment of central and western China, where the economic miracle has not taken place to the same extent as on the other side of the country, will allow China to use a surplus of cheap labor to keep some of these industries alive.
62. During the first eleven months of 2009, Chinese companies sold a total of 102,000 vehicles to Africa with a total value of $1.74 billion, transforming the continent into the biggest market for Chinese cars. Source: Africa Magazine, March 25, 2011. Available at http://www.focac.org/eng/zfgx/jmhz/t813155.htm.
63. In April 2011 the governments of Congo-Brazzaville and China signed a memorandum of understanding declaring that the African company Nouvelle Air Congo would acquire Chinese MA 60 airplanes. Source: http://fr.allafrica.com/stories/201104060804.html. China is attempting to break the worldwide duopoly held in the passenger sector of the aeronautical industry by the European Airbus and Boeing by creating Comac C919, an airplane with a capacity of over 190 passengers, expected to be available on the market by 2014.
64. In 2011 Huawei obtained $32 billion of revenues. In 2009, around 20 percent of Huawei’s revenues came from the African continent, where the company operates in fifty countries. Source: The authors’ own calculations based on figures taken from Huawei’s Annual Report of 2011 and information published by the Chinese press (http://gb.cri.cn/27824/2010/10/11/1545s3016588.html).
65. During his interview with the authors in Buenos Aires, Calvete refused to provide any overarching figures regarding revenue. He did however explain that each one of the shops—which stay open 24 hours a day, 365 days a year—turns over an average of 15,000 pesos (the equivalent of 2,550 euros) per day.
3 CHINESE MINES IN THE NEW WILD WEST
1. At least before the so-called “democratic transition” of 2011, there was a constant sense of being watched and of being surrounded by informers in Burma and throughout the length of the border with China. “You can’t trust anybody. Anyone could be a government spy,” one Burmese activist told us in a café in Rangoon’s Summit Park View Hotel. This paranoia is justified. There is a high price to pay for stepping out of line in Burma, as was demonstrated by the reprisals following the “Saffron Revolution” in 2007. Before 2011, for foreigners this would mean immediate expulsion from the country; for Burmese people, it would mean prison. Therefore, the real names of our i
nterviewees in Burma and Yunnan province have been replaced with fictitious ones for their own protection.
2. The official name of the country has been the Republic of the Union of Myanmar since October 2010, when the Burmese military regime also changed the country’s flag and national anthem. The country’s historical name—Burma—had already been replaced by the name Myanmar in 1989. The majority of opposition groups and several countries continue to refer to the nation as Burma as a way of denying any legitimacy to the regime.
3. “A Choice for China,” Global Witness, October 2005.
4. In an unprecedented surprise decision in 2006, the Burmese military junta moved the official capital of the country to Naypyidaw, a phantasmagorical administrative town with around 100,000 inhabitants situated 320 kilometers north of the then capital Rangoon. It is speculated that the regime’s decision was made in order to reinforce its power. The majority of foreign embassies have chosen to remain in Rangoon.
5. “A Disharmonious Trade,” Global Witness, October 2009.
6. Soon after independence, a significant number of ethnic minority groups scattered throughout the country took up arms to demand a greater level of autonomy. The conflict escalated when the military junta came to power in 1962, resulting in a covert civil war which has continued with differing levels of intensity throughout the following decades and has resulted in tens or even hundreds of thousands of deaths and the displacement of 2 million people. Some guerrilla resistance groups continue their activities today, but since 1994 at least sixteen of these groups have agreed to a ceasefire and have discontinued their hostilities. The Kachins, who in 1994 accepted the truce agreement in the hope that it would lead to a political dialogue that has never happened, broke the ceasefire in June 2011 and hostilities have resumed since then.