June 1, 2013

By HERIBERTO ARAJO and JUAN PABLO CARDENAL

HONG KONG - THE combInuLIon oI u sLrong, rIsIng CIInu und economIc sLugnuLIon In Europe
und AmerIcu Is mukIng LIe WesL IncreusIngIy uncomIorLubIe. WIIIe CIInu Is noL LukIng over LIe
worId mIIILurIIy, IL seems Lo be sLeudIIy LukIng IL over commercIuIIy. n jusL LIe pusL week, CIInese
compunIes und InvesLors Iuve sougIL Lo buy Lwo IconIc WesLern compunIes, SmILIIIeId oods, LIe
AmerIcun pork producer, und CIub Med, LIe rencI resorL compuny.
Europeuns und AmerIcuns Lend Lo IreL over BeIjIng`s usserLIveness In LIe SouLI CIInu Seu, ILs
LerrILorIuI dIspuLes wILI Jupun, und cyberuLLucks on WesLern IIrms, buL uII oI LIIs Is mucI Iess
ImporLunL LIun u pIenomenon LIuL Is Iess vIsIbIe buL more dIsLurbIng: LIe uggressIve worIdwIde
pusI oI CIInese sLuLe cupILuIIsm.
By buyIng compunIes, expIoILIng nuLuruI resources, buIIdIng InIrusLrucLure und gIvIng Iouns uII
over LIe worId, CIInu Is pursuIng u soIL buL unsLoppubIe Iorm oI economIc domInuLIon. BeIjIng`s
essenLIuIIy unIImILed IInuncIuI resources uIIow LIe counLry Lo be u gume-cIungIng Iorce In boLI LIe
deveIoped und deveIopIng worId, one LIuL LIreuLens Lo obIILeruLe LIe compeLILIve edge oI WesLern
IIrms, kIII jobs In Europe und AmerIcu und bIunL crILIcIsm oI Iumun rIgILs ubuses In CIInu.
UILImuLeIy, LIunks Lo LIe deposILs oI over u bIIIIon CIInese suvers, CIInu nc. Ius been ubIe Lo
ucquIre sLruLegIc usseLs worIdwIde. TIIs Is possIbIe becuuse LIose deposILs ure IInuncIuIIy
repressed - suvers receIve neguLIve reLurns becuuse oI InLeresL ruLes beIow LIe InIIuLIon ruLe und
sLrIcL cupILuI conLroIs LIuL prevenL suvers Irom InvesLIng LIeIr money In more proIILubIe
InvesLmenLs ubroud. ConsequenLIy, LIe CIInese governmenL now conLroIs oII und gus pIpeIInes
Irom TurkmenIsLun Lo CIInu und Irom SouLI Sudun Lo LIe Red Seu.
AnoLIer pIpeIIne, Irom LIe ndIun Oceun Lo LIe CIInese cILy oI KunmIng, runnIng LIrougI
Myunmur, Is scIeduIed Lo be compIeLed soon, und yeL unoLIer, Irom SIberIu Lo norLIern CIInu,
Ius uIreudy been buIIL. CIInu Ius uIso InvesLed IeuvIIy In buIIdIng InIrusLrucLure, underLukIng
Iuge IydroeIecLrIc projecLs IIke LIe Merowe Dum on LIe NIIe In Sudun - LIe bIggesL CIInese
engIneerIng projecL In AIrIcu - und Ecuudor`s $z. bIIIIon Cocu Codo SIncIuIr Dum. And CIInu Is
currenLIy InvoIved In LIe buIIdIng oI more LIun zoo oLIer dums ucross LIe pIuneL, uccordIng Lo
nLernuLIonuI RIvers, u nonproIIL envIronmenLuI orgunIzuLIon.
CIInu Ius become LIe worId`s IeudIng exporLer; IL uIso surpussed LIe UnILed SLuLes us LIe worId`s
bIggesL LrudIng nuLIon In zo1z. n LIe spun oI jusL u Iew yeurs, CIInu Ius become LIe IeudIng
LrudIng purLner oI counLrIes IIke AusLruIIu, BruzII und CIIIe us IL seeks resources IIke Iron ore,
soybeuns und copper. ower LurIIIs und CIInu`s boomIng economy expIuIn LIIs exponenLIuI
growLI. By buyIng muInIy nuLuruI resources und Iood, CIInu Is ensurIng LIuL Lwo oI LIe counLry`s
economIc engInes - urbunIzuLIon und LIe exporL secLor - ure secureIy suppIIed wILI LIe needed
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resources.
n Europe und NorLI AmerIcu, CIInu`s urrIvuI on LIe scene Ius been more recenL buL LIe IIgures
cIeurIy sIow u growIng Lrend: unnuuI InvesLmenL Irom CIInu Lo LIe Europeun UnIon grew Irom
Iess LIun $1 bIIIIon unnuuIIy beIore zoo8 Lo more LIun $1o bIIIIon In LIe pusL Lwo yeurs. And In LIe
UnILed SLuLes, InvesLmenL surged Irom Iess LIun $1 bIIIIon In zoo8 Lo u record IIgI oI $6.; bIIIIon
In zo1z, uccordIng Lo LIe RIodIum Group, un economIc reseurcI IIrm. usL yeur, Europe wus LIe
desLInuLIon Ior percenL oI CIInu`s IoreIgn dIrecL InvesLmenL.
GovernmenL supporL, LIrougI IIdden subsIdIes und cIeup IInuncIng, gIves CIInese sLuLe-owned
IIrms u mujor udvunLuge over compeLILors. SInce zoo8, LIe WesL`s economIc downLurn Ius
uIIowed LIem Lo guIn broud uccess Lo WesLern murkeLs Lo IunL Ior LecInoIogy, know-Iow und
deuIs LIuL weren`L prevIousIy uvuIIubIe Lo LIem. WesLern usseLs LIuL weren`L on suIe In LIe pusL now
ure, und CIInese InvesLmenLs Iuve provIded desperuLeIy needed IIquIdILy.
TIIs Lrend wIII onIy Increuse In LIe IuLure, us CIInu`s IoreIgn dIrecL InvesLmenL skyrockeLs In LIe
comIng yeurs. L Is projecLed Lo reucI us mucI us $1 LrIIIIon Lo $z LrIIIIon by zozo, uccordIng Lo LIe
RIodIum Group. TIIs meuns LIuL CIInese sLuLe-owned compunIes LIuL enjoy u monopoIIsLIc
posILIon uL Iome cun now pursue umbILIous InLernuLIonuI expunsIons und compeLe wILI gIobuI
corporuLe gIunLs. TIe unIuIrness oI LIIs sILuuLIon Is cIeuresL In LIe sLeeI und soIur- puneI IndusLrIes,
wIere CIInu Ius gone Irom u neL ImporLer Lo LIe worId`s IurgesL producer und exporLer In onIy u
Iew yeurs. L Ius been ubIe Lo IIood LIe murkeL wILI producLs weII beIow murkeL prIce - und
consequenLIy desLroy IndusLrIes und empIoymenL In LIe WesL und eIsewIere.
THS Is LIe reuI LIreuL Lo LIe UnILed SLuLes und oLIer counLrIes. However, mosL WesLern
governmenLs don`L seem Lo be uddressIng CIInu`s sLuLe-drIven expunsIonIsm us un ImmedIuLe
prIorILy.
On LIe conLrury, Europeun governmenLs deuIIng wILI LIeIr own economIc crIses see CIInu us u
counLry LIuL cun IeIp, eILIer by buyIng sovereIgn debL or goIng uIeud wILI InvesLmenLs In LIeIr
counLrIes LIuL wIII creuLe jobs.
TIe CIInese sLuLe-owned compuny Cosco currenLIy munuges LIe muIn curgo LermInuI In LIe
bIggesL Greek porL, PIrueus, neur ALIens - u -yeur concessIon deuI. And CIInu`s sovereIgn
weuILI Iund, C..C., Look u 1o percenL sLuke In ondon`s HeuLIrow AIrporL In zo1z, us weII us u
neurIy q percenL sLuke In LIe BrILIsI uLIIILy compuny TIumes WuLer. TIe sLuLe-owned IIrms TIree
Gorges CorporuLIon und SLuLe GrId ure LIe muIn IoreIgn InvesLors In PorLuguI`s power-generuLIon
secLor, und C..C. uIso bougIL u ; percenL sLuke In runce`s EuLeIsuL CommunIcuLIons.
n LIe Greek porL LIe CIInese Iuve been ubIe Lo LrIpIe cupucILy, umId IocuI unIons` crILIcIsm oI
worsenIng Iubor condILIons. L`s Loo eurIy Lo meusure CIInu`s ImpucL In LIe oLIer InvesLmenLs, buL
LIe IucL LIuL CIInese compunIes ure ubIe Lo InvesL In secLors LIuL ure cIosed or resLrIcLed Ior
Europeun IIrms In CIInu suys u IoL ubouL Iow mInImuI Europe`s Ieveruge wILI CIInu Is.
Tuke Germuny, wIIcI uccounLs Ior neurIy IuII oI LIe Europeun UnIon`s exporLs Lo CIInu. L`s
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IIgIIy unIIkeIy LIuL BerIIn wouId muke unIuIr compeLILIon LIe cornersLone oI ILs CIInu poIIcy.
Moreover, LIe Iuck oI Ieveruge und IeudersIIp In BrusseIs meuns LIuL LIe unIon Is unubIe Lo Luke
IIrm ucLIon Lo Iorce CIInu InLo udopLIng meusures LIuL wouId IeveI LIe pIuyIng IIeId or guurunLee
recIprocILy In ILs domesLIc murkeL.
TIe onIy excepLIon Is LIe UnILed SLuLes, wIIcI seems Lo be uddressIng LIe Issue by pusIIng
Iorwurd LIe Truns-PucIIIc PurLnersIIp, u regIonuI Lrude ussocIuLIon LIuL Is seen by crILIcs In BeIjIng
und eIsewIere us un AmerIcun-Ied poIIcy Lo conLuIn CIInu. TIe cIub Is LIougIL Lo be resLrIcLed Lo
counLrIes LIuL meeL IIgI AmerIcun sLundurds on Issues IIke Iree compeLILIon, Iubor und
envIronmenLuI sLundurds und InLeIIecLuuI properLy rIgILs. As CIInu doesn`L meeL LIose sLundurds,
IL wIII Iuve Lo reIorm or rIsk regIonuI IsoIuLIon. Moreover, LIe UnILed SLuLes Ius mude IIIe dIIIIcuIL
Ior LIe CIInese LeIecom gIunL HuuweI by reIusIng Lo grunL IL conLrucLs Irom IeudIng AmerIcun
LeIecom compunIes. TIIs Is noL jusL ubouL nuLIonuI securILy concerns buL uIso ubouL sendIng
BeIjIng u cIeur messuge LIuL LIe UnILed SLuLes governmenL Is wIIIIng Lo bIock one oI CIInu`s mosL
vIsIbIe und successIuI compunIes.
WIIIe WesLern compunIes compIuIn ubouL burrIers Lo pubIIc procuremenL und bIddIng und
sLruggIes Lo compeLe In resLrIcLed secLors In CIInu, CIInese compunIes enjoy red curpeL LreuLmenL
In Europe, buyIng up sLruLegIc usseLs und mujor compunIes IIke VoIvo und LIe Germun equIpmenL
munuIucLurer PuLzmeIsLer.
TIe percepLIon Is LIuL CIInu Is now unuvoIdubIe und, consequenLIy, LIe onIy opLIon Is Lo be
uccommoduLIng - oIIerIng everyLIIng Irom u generous InvesLmenL envIronmenL Lo essenLIuIIy
droppIng Iumun rIgILs Irom LIe ugendu. We don`L Iuve uny sLIck. We cun jusL oIIer curroLs und
Iope Ior LIe besL, u senIor Europeun oIIIcIuI LoId us.
GreenIund, u mussIve resource-rIcI LerrILory IurgeIy conLroIIed by Denmurk, Is u cuse In poInL.
usL yeur, IL pussed IegIsIuLIon Lo uIIow IoreIgn workers InLo LIe counLry wIo eurned suIurIes beIow
LIe IocuI IeguI mInImum wuge (LIe mInImum wuge LIere Is one oI LIe IIgIesL In LIe worId).
CIInese represenLuLIves Iud mude IL cIeur LIuL CIInese sLuLe-owned bunks und compunIes wouId
InvesL In LIe IIgI-rIsk, cosLIy expIoILuLIon oI GreenIund`s vusL mInIng resources onIy II LIe
modIIIcuLIon oI IocuI reguIuLIons wouId uIIow LIe urrIvuI oI LIousunds oI Iow-wuge CIInese
workers.
TIe ArcLIc LerrILory dIdn`L Iuve Loo muny uILernuLIves. No oLIer counLry Is In u posILIon Lo become
GreenIund`s sLruLegIc purLner Ior ILs IuLure deveIopmenL, gIven LIe busIness rIsks InvoIved In LIe
ArcLIc regIon und LIe scuIe oI LIe InvesLmenL needed In u LerrILory bIgger LIun MexIco buL wILIouL
u sIngIe IIgIwuy. An AmerIcun oII compuny couIdn`L Iuve IundIed LIe Lusk uIone. TIe CIInese
sLuLe cupILuIIsL sysLem, by conLrusL, uIIows muILIpIe sLuLe-owned compunIes Lo work LogeLIer,
mukIng IL possIbIe Ior LIe CIInu NuLIonuI PeLroIeum CorporuLIon, Ior InsLunce, Lo exLrucL oII wIIIe
CIInu RuIIwuy buIIds busIc InIrusLrucLure.
GreenIund`s Ieuders uccepLed CIInu`s Lerms becuuse LIey IIkeIy beIIeved LIese cosLIy projecLs
mIgIL never go uIeud II LIe CIInese dIdn`L geL InvoIved; onIy CIInu Ius LIe money, LIe demund,
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LIe experIence und LIe poIILIcuI wIII Lo proceed. Moreover, LIere ure noL enougI skIIIed workers In
GreenIund Ior sucI projecLs, so LIe GreenIundIc governmenL mude un excepLIon Lo LIe Iuw,
uIIowIng CIInese Iuborers Lo eurn Iess LIun mInImum wuge IIgurIng LIuL IocuI resIdenLs wouId
beneIIL Irom new InIrusLrucLure und royuILIes.
CIInu`s deep pockeLs, us weII us ILs exLensIve Iubor Iorce und unIImILed demund Ior nuLuruI
resources, mude uII LIe dIIIerence, und uccordIngIy GreenIund wus prepured Lo puss LuIIor-mude
IegIsIuLIon Lo meeL CIInese needs. Even Denmurk, wIIcI IoIds uuLIorILy In GreenIund In ureus
IIke mIgruLIon und IoreIgn poIIcy, decIded noL Lo InLerIere.
T Is even IuppenIng In progressIve busLIons IIke Cunudu. PresIdenL Obumu`s reIusuI LIus Iur Lo
upprove LIe KeysLone pIpeIIne projecL Ius mude PrIme MInIsLer SLepIen Hurper`s conservuLIve
governmenL Lurn Lo CIInu Lo secure un exporL murkeL Ior CunudIun crude oII reserves. TIe
CuIgury-bused oII IndusLry Ius IobbIed Mr. Hurper Lo udopL u new dIversIIIcuLIon sLruLegy LIuL
IncIudes LIe consLrucLIon oI u conLroversIuI pIpeIIne Lo wesLern BrILIsI CoIumbIu, despILe sLrong
opposILIon Irom envIronmenLuI groups, LIe IrsL NuLIons uborIgInuI communILIes und LIe pubIIc.
n LIe meunLIme, Cunudu uIso sIgned u oreIgn nvesLmenL PromoLIon und ProLecLIon AgreemenL
wILI CIInu, wIIcI gIves remurkubIy generous InvesLmenL proLecLIon Lo LIe CIInese.
WILI CIInu In LIe cenLer oI debuLes over PA und LIe wesL cousL pIpeIIne, Cunudu`s governmenL
LIen upproved LIe Lukeover oI LIe CunudIun energy gIunL Nexen by LIe CIInese sLuLe-owned oII
IIrm Cnooc. TIe $1.1 bIIIIon LrunsucLIon wus CIInu`s IurgesL IoreIgn Lukeover.
CIoser economIc LIes Iuve Iud poIILIcuI sIde eIIecLs; LIe Hurper udmInIsLruLIon now seems mucI
more cuuLIous In crILIcIzIng CIInu`s Iumun rIgILs record. GIven LIuL Cunudu wus unLII very
recenLIy one oI LIe IIercesL voIces on CIInu`s IundIIng oI dIssIdenLs, LIIs Is noL onIy u remurkubIe
18o-degree Lurn, buL uIso u cIeur IndIcuLIon oI Iow CIInu`s economIc InIIuence cun pusI LIe
poIILIcuI ugendu Lo LIe sIdeIInes, even In LIe WesL.
n AusLruIIu, CIInese uccumuIuLed InvesLmenL InIIows uL LIe end oI zo1z surpussed $o bIIIIon.
TIe Lrend Is sLrIkIng: CIInese dIrecL InvesLmenL In AusLruIIu In zo1z Increused z1 percenL Irom
zo11 IeveIs Lo reucI $11.q bIIIIon, mukIng IL un ImporLunL pIuyer In AusLruIIu`s mInIng IndusLry.
AusLruIIu`s Lrude porLIoIIo remuIns IIgIIy dIversIIIed, buL LIe CIInese sIure Is growIng rupIdIy.
CIInu Ius uIso become LIe bIggesL InvesLor In Germuny (In Lerms oI LIe number oI deuIs),
surpussIng LIe UnILed SLuLes. CIInese compunIes ure IookIng Ior compunIes LIuL, IIke PuLzmeIsLer,
Iuve u LecInoIogIcuI edge und Iuve become worId Ieuders In nIcIe murkeLs. TIose Lukeovers uIso
uIIow LIem Lo ubsorb WesLern know-Iow on brundIng, murkeLIng, dIsLrIbuLIon und cusLomer
reIuLIons. OLIers ure more opporLunIsLIc. uced wILI recessIon, sLruggIIng Europeun IIrms IIke
VoIvo quIckIy weIcomed CIInese purLners wIo were reudy Lo InjecL cupILuI und Luke IuII conLroI.
TIe Iouns LIuL BeIjIng Is gIvIng worIdwIde ure even more sIgnIIIcunL, In doIIur Lerms, LIun dIrecL
IoreIgn InvesLmenL. TIese Iouns IncIude $qo bIIIIon Lo VenezueIu und more LIun $8 bIIIIon Lo
TurkmenIsLun In recenL yeurs. CIInu`s poIIcy bunks (CIInu DeveIopmenL Bunk und ExporL-mporL
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Bunk oI CIInu) ure LIe key InsLILuLIons supporLIng CIInu`s Go gIobuI sLruLegy, us LIey provIde
bIIIIons oI doIIurs In Iouns Lo IoreIgn counLrIes Lo ucquIre CIInese goods; IInunce CIInese-buIIL
InIrusLrucLure; und sLurL projecLs In LIe exLrucLIve und oLIer IndusLrIes.
TIIs Is cIeuresL In counLrIes wIere LIe WesL cIuIms Lo IInk ILs uId Lo Iumun rIgILs und good
busIness prucLIces. CIInese Iouns Iuve been crucIuI In counLrIes IIke AngoIu LIuL Iuve Iuced
LIreuLs oI u cuLoII In IInuncIng Irom WesLern credILors, LIe WorId Bunk und LIe nLernuLIonuI
MoneLury und. Ecuudor, VenezueIu, TurkmenIsLun, Sudun und run Iuve uII Iuced sucI
dIIIIcuILIes, und CIInu Ius sLepped In wILIouL poIILIcuI or eLIIcuI sLrIngs uLLucIed. CIInese
sLuLIsLIcs reveuI IILLIe ubouL LIese Iouns, buL u sLudy by TIe InuncIuI TImes sIowed LIuL, beLween
zooq und zo1o, CIInu wus LIe worId`s IurgesL Iender, doIIng ouL $11o bIIIIon, more LIun LIe WorId
Bunk.
L Is ImporLunL Lo remember wIuL Is reuIIy beIInd CIInu`s gIobuI economIc expunsIon: LIe sLuLe.
CIInu muy be movIng In LIe rIgIL dIrecLIon on u number oI Issues, buL wIen CIInese sLuLe-owned
compunIes go ubroud und seek Lo pIuy by ruIes LIuL emunuLe Irom un uuLIorILurIun regIme, LIere
Is gruve dunger LIuL WesLern counLrIes wIII, ouL oI economIc need, end up pIuyIng by BeIjIng`s
ruIes.
As CIInu becomes u gIobuI pIuyer und u IIerce compeLILor In AmerIcun und Europeun murkeLs, ILs
poIILIcuI sysLem und sLuLe cupILuIIsL IdeoIogy pose u LIreuL. L Is LIereIore essenLIuI LIuL WesLern
governmenLs sLIck Lo wIuL Ius been LIe core oI WesLern prosperILy: LIe ruIe oI Iuw, poIILIcuI
Ireedom und IuIr compeLILIon.
TIey musL noL LIInk sIorLsIgILedIy. GIvIng up on our commILmenL Lo Iumun rIgILs, or beIng
compIIunL In LIe Iuce oI rupucIous sLuLe cupILuIIsm, wIII IurL WesLern counLrIes In LIe Iong Lerm. L
Is CIInu LIuL needs Lo udupL Lo LIe worId, noL LIe oLIer wuy uround.
Heriberto Arcjo cnd 1ucn Pcblo Ccrdencl cre the cuthors oj Chinc's Silent Arm: The Pioneers,
Trcders, Iixers cnd Worlers Who Are Remclin The World in eijin's Imce.
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