China's Silent Army
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48. Apart from the specific use of the term in this contract, Beijing frequently uses the expression “win-win policy” to describe its initiatives in developing countries which were previously colonized by Western powers. This can be seen as Beijing’s attempt to distance itself from Western strategies and, by extension, to use anti-colonialist discourse to create links with Africa and Latin America, thereby winning territory from Western countries.
49. Sicomines, the joint enterprise created on signing the contract, is in charge of managing both the $6 billion investment and the mining operation. It is made up of a consortium of five Chinese companies, led by the state-owned Sinohydro and China Railway Group, which own 68 percent of shares, and the Congolese state-owned Gecamines, which is a minor shareholder with 32 percent of the business.
50. This estimate is taken from “China and Congo: Friends in Need,” a 2011 report by the NGO Global Witness. The report bases its estimate on the average price of copper and cobalt over the last ten years.
51. Articles 14.2.1 to 14.3 of the contract.
52. This conservative estimate was made by Stefaan Marysse and Sara Geenen in their report “Win-Win or Unequal Exchange? The Case of the Sino-Congolese Cooperation Agreement,” Journal of Modern African Studies, 47 (3), 2009, pp. 371–96.
53. “In the twelve months following the approval of the Cooperation Project [contract] by the Chinese government, the DRC commits to obtaining the adoption of a law from its parliament that will guarantee the fiscal, customs and exchange regime demanded by the Cooperation Project, as a result of its specificity. If the National Parliament of the DRC does not adopt the aforementioned law within the agreed timeframe, the Chinese business group will have the right to decide whether to continue or terminate the current agreement.” The authors’ translation from the original French and Chinese.
54. “If the Mining JV [Sicomines] has not returned the investment and interests relating to the Mining and Infrastructure Projects within twenty-five years of its creation, the DRC commits to repaying the remaining balance in other forms,” according to article 13.3.4. The authors’ translation from the original French and Chinese.
55. A Congolese delegation spent two months negotiating the contract in Beijing. According to rumors that the authors were unable to confirm, the signing of the contract was preceded by a “buying spree” carried out by the African delegation in the Chinese capital, which was supposedly financed by China in order to facilitate the agreement. Joseph Kabila won a controversial presidential election held in December 2011 amid suspicions of electoral fraud.
56. Sources: Interview with Okenda and interview with the Chinese ambassador Wu Zexian, carried out by the journalist Victoire Eyobi on November 10, 2010, and published in the magazine Entreprendre.
57. The authors traveled to Likasi in the Congolese province of Katanga to visit the mining installations owned by the Chinese company Feza Mining, property of Wan Bao Mining, which in turn is part of the business group China North Industries Corporation (NORINCO). NORINCO is one of China’s most important defense companies, and was once subject to sanctions by the United States for supplying missile technology to Iran. Central Africa’s so-called “Copperbelt” harbors 10 percent of the world’s copper reserves and 34 percent of the world’s cobalt reserves.
58. “Win-Win or Unequal Exchange? The Case of the Sino-Congolese Cooperation Agreement,” op. cit., p. 390.
4 CHINA’S “BLACK GOLD” OFFENSIVE
1. According to the author Deborah Brautigam, Li said these words after taking part in roundtable discussions at the Center for Strategic and International Studies in Washington in April 2007. The phrase is a reference to an expression used by the scholar Ban Gu in his Chronicles of the Han Dynasty, written in the first century AD and one of the classic works of Chinese historiography. The complete expression is: “If the water is too clear, you will never catch a fish; the man who is too strict will never have friends.”
2. The names of people and places, as well as professions and any physical descriptions that might be used to identify the sources mentioned in this chapter, have been changed to ensure that they remain anonymous. In the 2012 World’s Most Repressive Societies ranking produced by the organization Freedom House, which measures the state of civil and political liberties across the world, Turkmenistan was vying with Burma, Sudan and North Korea for the lowest places. Repression is common currency in Turkmenistan.
3. These figures were provided by a Western diplomat and a Western expat, both of whom have lived in Turkmenistan for several years.
4. A diplomat living in Ashgabat confirmed that a place at the Turkmen State University costs between $20,000 and $80,000 depending on the area of study. Degrees in the arts and humanities are cheaper, as careers available to graduates in these subjects are not very well paid. Engineering degrees are the most expensive, as jobs, especially in the oil and gas industries, are better paid and these graduates can make money quickly. Getting a job always involves paying some kind of fee in advance: prostitutes have to pay a bribe to the local police, while anyone looking for a job sweeping roads in the relentless 50-degree heat first has to pay a $200 fee.
5. “Les Rapports secrets du Département d’État Américain: Le meilleur de WikiLeaks” (The Secret Relations of the US State Department: The Best of WikiLeaks), Le Monde Hors-Série, March 2011, pp. 71–4.
6. High-ranking members of the Communist Party of China often lead official visits to foreign countries in which Chinese government officials take part, despite the fact that these visits technically represent the state institutions and not any one political party. This fact highlights the subordinate role played by state institutions in the mechanism of Chinese politics, compared to the dominant role of the country’s only political party—the CPC.
7. BP’s 2012 annual report on world energy reserves suggests that the amount of proven gas reserves in Turkmenistan is close to 25 trillion cubic meters. BP Statistical Review of World Energy, June 2012; “Turkmenistan Foreign Policy,” Richard Pomfret, China and Eurasia Forum Quarterly, 6 (4), 2008, pp. 19–34.
8. Saparmurat Niyazov, the first president of Turkmenistan who led the country from its independence in 1991 until his sudden death in 2006 (probably caused by diabetes), was succeeded by Gurbanguly Berdymukhammedov, the country’s former minister of health, a role that he gained after working as a dentist. The great physical resemblance between the two men has led to a string of speculations, including rumors that Berdymukhammedov is in fact Niyazov’s illegitimate son.
Expat residents in Ashgabat tell all kinds of incredible stories about daily life in the country. For example, one source described the surreal nature of presidential visits to other provinces in the country: “I was invited to attend the inauguration of a new town to the east of Ashgabat, which President Berdymukhammedov would be attending. When I got there, I was astonished to find a dazzling white marble town where the hospitals were fully stocked with state-of-the-art equipment and the children in the nurseries spoke English. The president’s visit was celebrated with dancing and chanting by thousands of people who had headed out into the streets, and the president visited facilities throughout the town which wouldn’t have been out of place in the most highly developed countries of the world. For logistical reasons I had to spend the night in the area, and so I went back to the same town the next day. I found that the streets were deserted and the shops and public buildings were all closed. I didn’t understand what was happening, until one of the locals explained that everything that had happened the day before was just one big setup. They had brought children from Ashgabat and trained them for months for this show. The hospital equipment had also been brought there from the capital. It had all just been one big work of fiction orchestrated by the state.”
This same source explained that the president’s visits abroad also have their elements of fiction. The state-owned Turkmen television company apparently edited images taken from a speech by the president t
o the United Nations (easily done as a result of the rotary nature of operations at the UN) to demonstrate that Turkmenistan’s head of state constantly receives enthusiastic applause from his foreign counterparts. “Is it true that all the world’s presidents invited our head of state to give a speech and then wouldn’t stop clapping? That’s what we see on television,” a Turkmen friend asked our source, who will remain anonymous here for obvious reasons.
9. Getting a press visa for Turkmenistan is practically impossible. Getting a tourist visa is equally arduous and expensive and, among other things, involves the traveler having to provide detailed information about his or her route weeks in advance, as well as having to rely on a local guide throughout the visit to the country. As the authors had not mentioned their trip to Turkmenabat to their appointed guide (to avoid raising any suspicion), the trip to the town was technically “illegal,” as the guide himself assured the authors, threateningly, by phone.
10. The authors met Lei Li (not his real name) through a Chinese online chat room. They made contact with him from Beijing, and after months of conversations in cyberspace he agreed to meet the authors in this remote corner of Turkmenistan.
11. The Chinese CNPC is the only foreign company exploiting Turkmenistan’s onshore gas reserves. The other foreign corporations in the country are only exploring the offshore reserves of hydrocarbons in the Caspian Sea.
12. World Energy Outlook 2011, International Energy Agency (OECD/IEA, 2011).
13. Between the initial opening of the gas pipeline in December 2009 and June 2012, China imported 30 billion cubic meters (m3) of gas from Turkmenistan, according to figures from CNPC. On the basis of the bilateral agreements signed in June 2012, this figure should reach 65 billion m3 per year by 2015. Nevertheless, experts see Turkmenistan as an unreliable business partner in terms of supplying the amount of gas it promises to supply, as some sources doubt that the country can really achieve supplies of this volume.
The International Energy Agency (IEA) estimates that by 2015 China’s demand for gas will reach 165 billion m3 per year. Meanwhile, BP’s 2012 energy report stated that China consumed 130.7 billion m3 of gas in 2011 and produced 102.5 billion m3 of gas. Sources: “PetroChina Pipeline Turns on Gas Supply,” China Daily, June 5, 2012; “China Turns to Turkmenistan for Gas amid Gazprom Pipe Talks,” Bloomberg, March 4, 2011; World Energy Outlook 2011, op. cit.; BP Statistical Review of World Energy, op. cit.
14. Although there is little information available on these agreements in the public domain, published sources state that the CDB lent Turkmengaz $4 billion in 2009 in order to begin developing several gas deposits, including those in South Yolotan and Osman. In 2011, the CDB supplied an extra $4.1 billion loan to be repaid over ten years after a three-year grace period. The loans are guaranteed with the country’s hydrocarbons and, according to some sources, will be repaid with supplies of gas. Sources: “China Boosts Gas Imports from Turkmenistan,” Vladimir Socor, Asia Times, July 2, 2009; “China Lends $4.1 billion to Gas-Rich Turkmenistan,” Reuters, April 27, 2011.
15. China currently has three policy banks: the China Development Bank (CBD), the Export-Import Bank (the Exim Bank) and Agricultural Bank of China (ABC). These banks were established to support China’s infrastructure development (CBD), trade promotion (Exim Bank) and agriculture (ABC). Out of the three, the Exim Bank is the one with the clearest political leanings. It is the only Chinese institution qualified to offer “concessional loans” and “preferential export buyer’s credit,” loans which offer much lower rates of interest than the market rate and highly favorable repayment conditions, which serve to provide aid and investment for developing countries. The loans serve the double purpose of facilitating Chinese exports and supporting Chinese diplomacy. The Exim Bank, an impenetrable institution which acts directly on the orders of the State Council, does not publish any data in its annual report detailing the amount of credit it has granted or identifying who has received these loans. In a surreal interview which the authors finally secured with the institution in 2010, described in this book’s introduction (this page), Yan Qifa, deputy director of the bank’s department of economic research, told the authors that he did not know “how many concessional loans China grants each year.”
On the other hand, the CDB, which was established in 1994, is also government-owned and its control falls under the State Council. Domestically, it supports government-led infrastructure projects, while internationally it follows Chinese SOEs in their ventures abroad. The CDB has an extensive international presence, and is the largest provider of international financing among China’s banks under China’s “go-out” investment policy. The CDB seems to be adopting a more commercially oriented business approach, and is perceived to be following a strategy aiming to transform it into a universal banking conglomerate. However, given its business nature and ownership structure, it is unlikely that the government would withdraw its support.
16. The Brookings Institute expert Erica Downs argues that the Chinese state-owned oil companies and the CDB have managed to acquire a certain degree of independence from the government over recent years. This does not mean, however, that they do not ultimately have to submit to the rule of the party-state (which is in charge of naming the presidents of these corporations, among other things). Nevertheless, Downs argues that “China Inc.” is not a “monolithic” entity which makes its decisions “from the top down.” Analysts Julie Jiang and Jonathan Sinton put forward a similar argument in their recent report for the International Energy Agency. In this regard, it is important to point out that, while Chinese state-owned corporations and banks try to pursue a balance between the country’s national interests and the profitability of the projects they carry out, it is impossible to separate the state or the characteristics of its financial system from China’s expansion across the world. This is particularly true if we take into account the fact that the technology owned by these companies lags “several decades” behind that of Western companies, according to various experts who spoke to the authors on the subject. In the words of the academic Ricardo Soares de Oliveira, “While still lagging behind Western companies in most areas, Chinese NOCs [National Oil Companies] bring to the table the weight of the Chinese state, a willingness to pay for long-term engagements that would not be viable if perceived in the short term, and cheap finance to secure deals.”
Probably the best example is the agreement made in February 2009 between the Russian companies Rosneft and Transneft, on the one hand, and the CDB and CNPC, on the other. On the basis of this agreement, the CDB committed to granting the two Russian companies a $25 billion loan at an annual interest rate of 5.69 percent (a highly favorable rate considering the economic situation at the time). In return, the Russian companies committed to providing the CNPC with a daily supply of 300,000 barrels of oil at the market price. This caused Russia to change its original plans, after fifteen years of negotiations, and finally consent to build a Chinese branch of the Eastern Siberia Pacific Ocean (ESPO) pipeline, which originally only aimed to provide a link between the Siberian oil reserves and Japan.
Sources: Inside China, Inc.: China Development Bank’s Cross-Border Energy Deals, Erica Downs (Brookings Institute, 2011); Overseas Investments by Chinese National Oil Companies: Assessing the Drivers and Impacts, Julie Jiang and Jonathan Sinton (IEA, February 2011). Quote by Soares de Oliveira taken from “Making Sense of Chinese Oil Investment in Africa,” 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. 98.
17. China’s currency reserves, which represented a total of $3.2 trillion at the close of 2011, stem primarily from four different sources: direct foreign investment in the country, China’s trade surplus, tourism and the so-called “sterilization” process of its currency (China buys in dollars to maintain a fixed exchange rate). The SAFE (State Administration of Foreign Exchange) manages the funds using various different types of investment, basi
ng its decisions on the degree of risk involved, strategic requirements and profitability. Up until the 2008 crisis, China used to invest a significant amount of its currency in US Treasury bonds, but risk perception and the fact that its assets might be losing purchasing power have since led Beijing to diversify its investments. The use of part of its currency reserves to finance projects carried out by Chinese businesses abroad is perfectly in line with this strategy. As such, China’s currency reserves also serve to make its businesses more international, making a decisive contribution to China’s conquest of foreign markets.
18. Despite its much noted signs of illiteracy, the “Book of the Soul” was apparently written by Niyazov “with the help of the inspiration which God sent to his heart.” The two-volume work outlines a family tree linking the president back to the very beginnings of humanity. It also provides instruction about how to behave in public and at home. The book is compulsory reading at schools and universities in Turkmenistan, and knowledge of the work is a necessary requirement to get a job as a government employee, and even when applying for a driving license. There are over forty foreign translations of the Ruhnama, all of them commissioned by entrepreneurs who have followed the lead of Turkish businessman Ahmet Çalik by translating the work into languages including French, English and Chinese. Arto Halonen’s documentary film, Shadow of the Holy Book, provides more information on the subject.