A New Superpower’s Negative Impact Overseas
Chen Pokong
Mr. President, ladies and gentlemen,
It is my honor to be here tonight to join this debate.
While China exerts influence beyond its borders, I do not believe that China is interested in benefiting the world, but instead in China’s own self-interest, especially that of the Red Elite.
On March 29, one week before US President Donald Trump was scheduled to meet with Chinese President Xi Jinping at Mar-a-Lago, the family of Trump’s son-in-law, Jared Kushner, suddenly terminated a major business deal with China’s Anbang Insurance Group. The chairman of the board of Anbang is Wu Xiaohui, who is married to the granddaughter of former Chinese leader Deng Xiaoping.
Anbang planned to invest in the flagship office tower owned by the Kuschner family (located at 666 5th Avenue, New York City), a deal that had been launched during the presidential campaign in 2016. After Trump was elected president, Wu Xiaohui stepped up the pace of the negotiations. If this US$6.7 billion deal had gone through, the Kushner family would have gained the following benefits:
The Kushner family would only have to pay US$750 million for a 20% stake in a $7.2 billion project; the Kushner family would put up only $50 million to pay off $250 million in debt; furthermore, the deal would allow the Kushner family to cash out of their investment with a profit of $400 million. This massive lump of cash was basically a gift from Wu Xiaohui and Anbang to the Kushner family.
This was clearly an unequal, unfair and one-sided deal. Wu Xiaohui and Anbang were willing to take a loss because they wanted to gain an advantage, or, as the Chinese saying goes, “Cast a long line to catch a big fish.” Wu Xiaohui had trained his sights not only on the Kushners, but on President Trump, intending to use his connection with the Kushners to influence Trump’s policies on China. (Last December, while awaiting his inauguration as president, Trump broke with convention by having a telephone conversation with Taiwanese President Tsai Ing-wen. The Chinese government expressed its displeasure to Trump through the connection between Wu Xiaohui and Kushner.)
One time at the end of a negotiation with the elder Kushner, Wu Xiaohui was so ecstatic that he burst out in English to all who were present: “I love you!”
The US media have constantly raised suspicion over the conflict of interests represented by the Trump family’s overseas holdings, and the Kushner family was ultimately compelled to abandon the deal with Anbang. This aborted deal exposed the objectives of overseas investment by Chinese companies: more than mere economic benefit, they also involve Beijing’s political objectives and international strategic arrangements.
In 2014, Anbang purchased New York’s famous Waldorf Hotel for $1.95 billion. This was a hotel that regularly hosted American presidents and foreign heads of state. After Anbang bought the hotel, the American president and most other national leaders no longer patronized it, clearly due to security concerns such as worries about listening devices.
In recent years, Chinese companies have been on a buying spree overseas, especially in Western countries. Chinese companies engaged in overseas buyouts, whether as state-owned companies or as private enterprises, almost all have one thing in common: a connection with the Red elite. For example:
Apart from the Anbang chairman being the grandson-in-law of deceased Chinese leader Deng Xiaoping, its former or current shareholders or directors include people like Chen Xiaolu, the son of late PLA Marshal Chen Yi, and Zhu Yunlai, son of former Premier Zhu Rongji.
The chairman of Wanda Group is Wang Jianlin, a member of the “Red second generation” whose father took part in the Communist revolution led by Mao Zedong. Other members of the Red elite who own shares in Wanda include: The elder sister of current Chinese President Xi Jinping, Qi Qiaoqiao, and her husband, Deng Jiagui (they later withdrew their shareholding and re-invested under the name of a functionary); the son of former President Hu Jintao, Hu Haifeng; the daughter of former Premier Wen Jiabao, Wen Ruchun; the son-in-law of former Politburo Standing Committee member Jia Qinglin, Li Botan; and the son of former National People’s Congress standing committee vice-chairman Wang Zhaoguo, Wang Xinning.
The Alibaba Group’s chairman of the board, Jack Ma, comes from a humble family background, but as his company became an internet giant, it pulled in large numbers of the Red elite, with more than 20 family members of current or former Politburo Standing Committee members becoming investors or shareholders.
Like many Chinese billionaires, Anbang chairman Wu Xiaohui makes no attempt to cover up his opportunism, and considers netting the granddaughter of Deng Xiaoping one of his major accomplishment. Wu Xiaohui once openly boasted of his good fortune and shrewdness by saying, “If you choose to stay in the countryside, you’re only going to bump into village girls. But if you go to Paris, you’ll have a chance to see the Mona Lisa.”
The objective of Chinese companies’ massive overseas acquisition drive targeting name-brand companies and high-end enterprises is to buy out the innovative technology of Western countries and transfer the technology and production lines to China, leaving shell companies behind. In Europe, Chinese companies mainly targeted British and then German companies for their buy-outs.
Yet, this acquisition activity is carried out under unequal and unfair conditions: Chinese companies can completely buy out Western companies, but it is impossible for Western companies to completely buy out Chinese companies; shareholdings are usually limited to less than 50 percent, and some Chinese industries don’t allow any foreign investment at all. Especially in the case of government-connected enterprises, Chinese companies can offer to purchase Western companies, but Western companies are not allowed to issue offers to Chinese companies of the same kind.
Western countries have ample reason to worry about the objectives and motivations of Chinese companies in their overseas purchases. Chinese companies seem to intentionally target enterprises or projects related to the technological, economic, political and security lifelines of Western countries. As Western countries have begun to increasingly suspect these motivations, the failure rate of Chinese buyouts has increased, a growing number of acquisitions by Chinese companies run by Wu Xiaohui, Wang Jianlin, Jack Ma and other well-connected entrepreneurs have been obstructed and defeated.
In early 2016, Anbang attempted to acquire the Starwood hotel chain for $14 billion, but the deal fell through when Anbang failed to provide details of its share structure and financing. At the end of 2016, the China Grand Chip Investment Fund attempted to acquire the German semiconductor manufacturer Aixtron, but the German government halted the deal after warnings from US intelligence agencies. Jack Ma’s Ant Financial Services Group made an offer to acquire the American financial services company MoneyGram in 2017, but two members of US Congress have called on the Committee on Foreign Investment in the United States to carry out a thorough investigation, worried that this acquisition might lead to a foreign government controlling a key American financing platform. Negotiations are still ongoing, with rival bidder Kansas-based Euronet also raising security concerns about the Ant Financial deal.
For nearly 20 years, China has made massive investments in Africa, targeting the mineral and energy sectors. Investment in African countries totals tens of billions of dollars every year. The total of $75 billion invested from 2000 to 2011 is seven times the amount that Japan invested during that same period. One million Chinese are currently active in Africa. China’s trade with Africa reached $149.1 billion in 2016 (including $92.2 billion in Chinese exports to Africa, and $56.9 billion in imports from Africa to China, creating a trade deficit of more than $35 billion for African countries). As China-Africa trade has grown, Africans’ antipathy toward the Chinese has likewise increased.
Africans complain that Chinese companies pay low wages under poor working conditions, that their products are inferior, that their construction is shoddy and detrimental to the environment. China’s mining activities in Africa regularly meet with protest from local people, and Chinese companies often experience violent clashes with local workers. Africans compare the Chinese to parasites rather than investors.
China invests in Africa ostensibly with “no conditions attached,” but the World Bank and other international organizations have pointed out that Beijing’s methods offset the international community’s efforts to use trade to promote political reform and to use economic aid in exchange for human rights. China turns a blind eye to corruption, abuse of power and trampling on human rights by African governments, and even extends its own corrupt and dictatorial “China Model” to Africa in its attempts to “Sinicize” Africa.
While claiming “no conditions attached,” China attaches alternative conditions to its investment in Africa: The profits that African countries gain through Chinese investment have to be spent on infrastructure built by China and on products imported from China. At the same time that Chinese companies invest in Africa, they continually purchase raw materials from China and hire Chinese workers, increasingly excluding local people. This makes China’s aid to Africa more like a pillage of Africa, and has led with China being referred to as “neo-colonialist.”
What former Zambian President Michael Sata said while campaigning for office in 2007 is typical of this sentiment. Describing Chinese investment as “a dumping ground for their human beings,” Sata said, “We want the Chinese to leave and the old colonial rulers to return. They exploited our natural resources too, but at least they took good care of us. They built schools, taught us their language and brought us the British civilization. At least Western capitalism has a human face; the Chinese are only out to exploit us.”
Starting in 2010, an increasing number of countries such as Zambia, Angola, Gabon and Chad have been saying no to China by refusing new cooperation, halting existing cooperation and taking back development projects. It is clear that China has become unwelcome in Africa.
Last month New York Times posted an editorial: China Wants Fish, So Africa Goes Hungry. According to this article, with China’s own waters heavily overfished, the Chinese government supports its fishermen sailing farther to exploit the waters of other countries, pushing the fish stocks to the brink of collapse. The Chinese government commands a fleet of 2,600 vessels, 10 times larger than the United States fleet, all heavily subsidized. The Chinese government is concerned with its domestic needs and regime security much more than the health of the world’s oceans and the countries that depend on them.
As its wealth increased, the Chinese government took the lead in establishing the Asian Infrastructure Investment Bank, but the world’s first and third largest economies, the US and Japan, have not joined the bank. Japan at one point asked the Chinese side: How will you avoid corruption in the AIIB? And how will you avoid the risk of debt default? The Chinese side did not respond. This is one reason why Japan hasn’t joined AIIB. (Of course, another aspect is that the Chinese-led AIIB is intended to serve as a rival to the Japanese-led Asian Development Bank.)
Corresponding to the AIIB is Beijing’s extremely ambitious “One Belt One Road” strategy (which was recently changed in English to “Belt and Road”), which extends China’s maritime and overland trading routes to every part of the world.
European countries refused to sign the trade statement at the Silk Road summit held in Beijing last month. European countries complained that the statement did not address European concerns surrounding transparency of public procurement and social and environmental standards.
The term One Belt One Road supposedly mirrors the Silk Road concept China employed in the seventh century, but at that time the Silk Road was an international trading corridor spontaneously formed by private citizens. The so-called New Silk Road is permeated with the Chinese government’s two key political and economic objectives: The first is to carry out Chinese-style hegemonism by controlling countries along the belt or road through the pretext of economic aid and economic development, and using this opportunity to establish an international economic network with China at its center. The second is to shift China’s excess production capacity overseas, and transfer the crisis and risk of China’s economic recession.
The first project of One Belt One Road was the construction of a large hydroelectric plant in Pakistan to facilitate the development of the so-called “China-Pakistan Economic Corridor”. Beijing’s motives were all too obvious: Pakistan is just about China’s only allied country besides North Korea. Beijing was sending the signal that it would prioritize investment in countries that followed Beijing’s orders. In other words, countries that do not obey Beijing’s orders would not enjoy such benefits.
In the South China Sea, Beijing claims that 80% of this maritime region belongs to China, and China’s so-called territorial boundary (the nine-dash line) encircles the entrances to Vietnam, the Philippines and other countries, not even allowing for the exclusive economic zones of neighboring countries. Beijing may rationalize this because the name of the South China Sea includes the word China, but according to that logic, Mexico can claim 80% of the Gulf of Mexico, and India can claim 80% of the Indian Ocean. (Last year, the Permanent Court of Arbitration rejected China’s claims of sovereignty within the nine-dash line.)
China has occupied Scarborough Shoal (also known as Huangyan Island) and some other islands in the exclusive economic zone of the Philippines, in violation of the United Nations Convention on the Law of the Sea to which China is a signatory. According to this convention, Beijing acknowledges that each country has an exclusive economic zone of 200 nautical miles. China has also built seven artificial islands with military installations in the South China Sea in violation of the Declaration on the Conduct of Parties in the South China Sea, which China adopted with ASEAN nations in 2002. In this declaration, Beijing acknowledges that no one party can take unilateral action to change the existing conditions in the South China Sea.
China, although a permanent member of the UN Security Council, has long ignored UN resolutions on North Korea’s nuclear threat; even sanctions that China took part in drafting and voted to support have not affected China’s trade with North Korea. Last Year, North Korea carried out two nuclear bomb tests, but China’s trade and aid to North Koreas actually increased rather than decreased. Chinese companies such as Hongxiang Industrial have been providing nuclear components and materials to North Korea for years, implying Chinese support of Pyongyang’s nuclear aspirations. It wasn’t until the beginning of this year, under enormous pressure to rescue imperiled Sino-American relations under the Trump administration, that the Xi Jinping government began implementing UN resolutions by temporarily halting coal imports from North Korea. Xi has recently tacitly agreed to Trump taking a harder line against Kim Jong-un.
Speaking of economic development, Chinese officials often proudly show off: "China only took more than thirty years to walk through the Western countries for hundreds of years." But how did this come about? Plagiarism, cyberattacks, large-scale pirating of intellectual property rights. This is not only Chinese individuals or enterprises’ behaviors, but more so the Chinese government and the Chinese Army’s behaviors.
In summary, as the world’s second-largest economy and newest superpower, China’s overseas impact is growing by the day. However, its methods, processes, and results all show that, generally, China’s overseas impact is not constructive, but rather destructive; and that China is not contributing to world peace, but rather introducing danger and risk to the world.
If the house welcomes China’s impact overseas, should be a democratic China’s impact overseas. I believe that only a democratic China can bring benefit and peach to the world.
Ladies and gentlemen, thank you very much!
June 1, 2017, at Oxford Union
University of Oxford
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