Tuesday, June 26, 2018

Development Aid, with Chinese Characteristics

I am sympathetic to the theory that the worry that China will become the next global hegemon is overblown. Different schools of this belief have different totems; some demographics of a rapidly aging nation, others the exceptional economic fragility that makes China ripe for a sharp recession leading to internal conflict - but while I can see these are factors, I am starting to subscribe to another confession; China is her own worst enemy.

As a dime-store therapist might say, China has "a lot of baggage." She holds other ethnicities and nations in contempt. She does not have an open culture or one that is flexible enough to be nuanced. She also has a stubborn record of corruption, pride, and cold-hearted mercantilism that would put the East India Company to shame.

She also has a huge chip on her shoulder. She remembers the Opium Wars. She knows how the British and the Portuguese got Hong Kong and Macau. They know how Russia got their far east.

They remember as if it were yesterday. In their 3-4,000 cultural history, it is. Don't discount payback and catch-up going on.

In her desire to secure her economic GLOC and SLOC (Belt & Road), she is using any tool she can to get what she wants. As word gets out as to what happened to others, eventually other nations will demur ... if those nations can find a way to place uncorruptible and competent people in decision making positions.

NYT has a perfect example this week in a story about how China managed to get their foothold right off India in Sri Lanka.

Reading this, it became clear that Goodfellas and The Godfather movies are not all that popular in Sri Lanka. If so, they might have avoided their fate;
Every time Sri Lanka’s president, Mahinda Rajapaksa, turned to his Chinese allies for loans and assistance with an ambitious port project, the answer was yes.
Mr. Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make payments on the debt he had taken on. Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.
Few things are more dual use than a good port. This is how, if you're playing a long game, you get a naval base.
The case is one of the most vivid examples of China’s ambitious use of loans and aid to gain influence around the world — and of its willingness to play hardball to collect.
From a mercantilism POV, will this be a net economic gain for China? That is a tough sell. From an imperialist POV though, who cares? What a great base if you need one.

Got to get trinkets to the right natives though.
• During the 2015 Sri Lankan elections, large payments from the Chinese port construction fund flowed directly to campaign aides and activities for Mr. Rajapaksa, who had agreed to Chinese terms at every turn and was seen as an important ally in China’s efforts to tilt influence away from India in South Asia. The payments were confirmed by documents and cash checks detailed in a government investigation seen by The New York Times.

• Though Chinese officials and analysts have insisted that China’s interest in the Hambantota port is purely commercial, Sri Lankan officials said that from the start, the intelligence and strategic possibilities of the port’s location were part of the negotiations.
• Though the deal erased roughly $1 billion in debt for the port project, Sri Lanka is now in more debt to China than ever, as other loans have continued and rates remain much higher than from other international lenders.
Is debt really that much of a weapon? It has been used as such for thousands of years, no reason to see that change now.
“John Adams said infamously that a way to subjugate a country is through either the sword or debt. China has chosen the latter,” said Brahma Chellaney, an analyst who often advises the Indian government and is affiliated with the Center for Policy Research, a think tank in New Delhi.
Just don't look at who owns American debt.
“The only way to justify the investment in Hambantota is from a national security standpoint — that they will bring the People’s Liberation Army in,” said Shivshankar Menon, who served as India’s foreign secretary and then its national security adviser as the Hambantota port was being built.
That is exactly how you should look at it.

You need to read the full article so you can see the template they will use where there are democratic systems in place. The 2015 election will do.

It appears that inside China there is not full alignment with how best to gather the access they want. Do they keep the established template, or something less likely to scare away other nations?
Some Chinese officials have become concerned that the nearly institutional graft surrounding such projects represents a liability for China, and raises the bar needed for profitability. President Xi acknowledged the worry in a speech last year, saying, “We will also strengthen international cooperation on anticorruption in order to build the Belt and Road Initiative with integrity.”
Time will tell, but man ... you almost need a 2-meter whiteboard to track this;
The deal left some appearance of Sri Lankan ownership: Among other things, it created a joint company to manage the port’s operations and collect revenue, with 85 percent owned by China Merchants Port and the remaining 15 percent controlled by Sri Lanka’s government.

But lawyers specializing in port acquisitions said Sri Lanka’s small stake meant little, given the leverage that China Merchants Port retained over board personnel and operating decisions. And the government holds no sovereignty over the port’s land.

When the agreement was initially negotiated, it left open whether the port and surrounding land could be used by the Chinese military, which Indian officials asked the Sri Lankan government to explicitly forbid. The final agreement bars foreign countries from using the port for military purposes unless granted permission by the government in Colombo.

That clause is there because Chinese Navy submarines had already come calling to Sri Lanka.

Strategic Concerns
China had a stake in Sri Lanka’s main port as well: China Harbor was building a new terminal there, known at the time as Colombo Port City. Along with that deal came roughly 50 acres of land, solely held by the Chinese company, that Sri Lanka had no sovereignty on.
This story will not be going anywhere;
Now, the handover of Hambantota to the Chinese has kept alive concerns about possible military use — particularly as China has continued to militarize island holdings around the South China Sea despite earlier pledges not to.

Sri Lankan officials are quick to point out that the agreement explicitly rules out China’s military use of the site. But others also note that Sri Lanka’s government, still heavily indebted to China, could be pressured to allow it.

And, as Mr. de Silva, the state minister for national policies and economic affairs, put it, “Governments can change.”
Remember, there are so many lessons from The Lost Boys. The most important one - a vampire can only hurt you if you invite them in to your house.

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