Papua New Guinea [Ramu nickel laterite project] and China’s New Empire – by Geoffrey York (Globe and Mail – January 3, 2009)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media. Please note that this article was orginally published January 3, 2009.

MADANG, Papua New Guinea

When Chinese engineers landed in Papua New Guinea in 2006 to inspect their latest mineral acquisition, they faced an arduous journey through the tropical wilderness. They drove over crumbling roads to the Ramu River, then found natives with dugout canoes to paddle them upstream. Next, they hired another team of locals with machetes to slash a rough trail for eight hours through the steamy jungle, dodging poisonous snakes and malaria-carrying mosquitoes.

“It was terrible,” recalls Wang Chun, the chief engineer. “You couldn’t breathe.”

Today, less than three years later, a series of small Chinatowns has emerged in the jungle — complete with Chinese food, Chinese satellite television channels and crews of Chinese migrant labourers living in cheap dormitory huts. Where once was wilderness, you find the workers of China Metallurgical Group Corp., toiling seven days a week and chattering about their families back home in Beijing and Sichuan.

It hasn’t been easy. The state-owned mining company has dealt with violent clashes with local landowners, striking workers, attacks from the media and unfriendly police who arrested more than 200 Chinese technicians on charges of illegally entering the country. But today it is transforming the economy of Papua New Guinea. Its $1.4-billion nickel and cobalt mine (all figures U.S.), the biggest construction project in the country, will employ 4,000 people at its peak, adding at least 10 per cent to the national economy every year.

Already, its workers have built the country’s longest bridge, eliminating the need for those canoes. They have built the country’s biggest wharf. They have carved out a 25-kilometre access road in the mountains. And now they are working on a 135-kilometre pipeline to the company’s new refinery on the coast.

This remote Pacific country is the latest outpost in the New Chinese Empire — a far-flung network of trade and investment that also generates political power.

In less than a decade, China has spun a web of strategic investments that stretches from Latin America to the former Soviet Union, from the remotest islands of the South Pacific to the huge oil fields of Angola and Sudan. In a range of resource-rich countries, China is diligently cultivating its interests.

It is winning political connections, gaining new markets and capturing vital resources. On some continents, China has matched — or even surpassed — the trading muscle of the traditional empire-builders of Europe and the United States.

China has become a presence in almost every country that has fallen off the mental maps of American and British geopolitical planners. This is how a superpower is born — one sphere of influence at a time.

‘Walking out’

It would be naive to see this as normal capitalism. State-controlled Chinese companies obey a policy of “walking out” into the world and acquiring properties for the national interest — nickel and copper projects to feed China’s voracious manufacturing sector, oil fields to fuel its cars and industry, logging projects to supply its furniture factories and coal and natural-gas projects to satisfy its energy needs.

It all has carefully calculated benefits to the Chinese state, which doesn’t require short-term profits from these projects. And it is scarcely affected by the Western financial meltdown. Recessions and stock-market crashes are minor speed bumps on China’s expressway to global power.

In my nearly seven years as The Globe and Mail’s Beijing correspondent, this is the most striking phenomenon that I have witnessed. I have seen China’s footprint in the oddest places around the world — a Russian border city that is now dominated by Chinese construction companies and market traders; entertainment palaces in Myanmar and Pyongyang built exclusively for the pleasure of Chinese visitors; a huge banner in the middle of Addis Ababa that proclaims: “Learn Chinese Now.”

Western fears have focused on Africa, where Beijing has swiftly become a key player in the oil industry, snagging valuable energy deals and strategic mining concessions. China’s trade with Africa has soared from a mere $2-billion in 1999 to an astonishing $74-billion in 2007, rivalling the United States for trade leadership in the continent. Chinese leaders have made dozens of trips there and have sent construction teams to build hospitals, clinics, highways, railways, universities, mines, hydro dams, housing compounds and presidential palaces.

Western diplomats in Ethiopia told me about the frustration of travelling to remote corners of the country, only to discover that a delegation from Beijing has just left a local official’s office. “The Chinese are everywhere,” one diplomat said.

The President of Senegal put it bluntly: “The Chinese are more competitive, less bureaucratic and more adept at business in Africa than their critics,” Abdoulaye Wade wrote. “China’s approach to our needs is simply better adapted than the slow and sometimes patronizing post-colonial approach of European investors.”

By 2010, China forecasts that its Africa trade will reach $100-billion, making it the continent’s most important trading partner. China is already the biggest trading partner of oil-rich but authoritarian countries such as Sudan and Angola.

Within the past few days, a Chinese conglomerate announced one of the biggest investments China has ever made in Africa, a $2.6-billion stake in Liberia’s main iron-ore mine.

China also has signed mining and energy deals reportedly worth $1.6-billion with Zimbabwe, undercutting the international sanctions against Robert Mugabe’s regime. China helps keep his government afloat by investing heavily in Zimbabwean farming, in coal, diamond and gold mines and in tobacco factories.

“We look again to the East, where the sun rises, and no longer to the West, where it sets,” Mr. Mugabe said recently.

In addition, China is competing openly with traditional Western donors by offering infrastructure and social services. In the Democratic Republic of the Congo, for example, China announced a $9-billion plan to build thousands of kilometres of railways and roads, 32 hospitals, 145 health centres, two hydro dams and two airports — all in exchange for access to lucrative copper and cobalt resources.

China has forgiven the debts of 32 African countries, and in 2006, it brought more than 40 African heads of state to a red-carpet summit in Beijing, the biggest such summit ever held outside Africa. Thousands of local motorists were ordered to stay home to keep the roads clear for the leaders. At the summit, China announced $5-billion in loans and credits for Africa, along with pledges to train 15,000 African professionals, to build dozens of hospitals and schools and to double development assistance by 2009.

“This 21st century is the century for China to lead the world,” Nigerian President Olusegun Obasanjo has said. “And when you are leading the world, we want to be close behind you. When you are going to the moon, we don’t want to be left behind.”

Support from African countries has paved the way for China to win key votes at the United Nations and other international bodies, which helped it to gain the hosting rights for the 2008 Beijing Olympics and to neutralize the powers of the UN Human Rights Council, among other victories.

Meanwhile, Chinese investors also have grabbed control of some of the most highly visible Western brands, including the Thinkpad personal-computer business of IBM, the MG Rover motor company in Britain (maker of iconic MG sports cars) and the French parent company of the RCA television brand. Chinese concerns have made audacious bids for the huge Unocal oil and Maytag appliance companies and Canada’s Noranda mining group.

As the global financial crisis deepens, Chinese state companies are increasingly seen as “white knights” — ready to step in to acquire companies that might otherwise fall into distress. When the Wall Street giant Morgan Stanley struggled this fall, China’s wealthy CITIC group reportedly was considering a takeover bid.

Less than five years after creating the concept, China now supports 249 Confucius Institutes in 78 countries around the world — the equivalent of the British Council or Germany’s Goethe Institute, to promote China’s language and culture — advancing the cause of the country’s “soft power” abroad. In the same time period, it has helped 60,000 teachers promote its language internationally: An estimated 40 million people are now studying Chinese as a second language around the world.

(China has been adept at using the education system to bolster its own political interests. During the wave of Tibetan protests in the country last spring, tens of thousands of Chinese students held demonstrations in support of the government in cities across Canada, Australia, the United States and elsewhere. Many were given transportation and logistical support from Chinese embassies.) China’s military, too, is following the soft-power strategy: After decades of isolation from UN peacekeeping operations, China is now a highly active participant, having sent more than 10,000 peacekeepers to 18 missions in recent years. This week, Beijing dispatched three naval ships to the coast of Somalia on an unprecedented mission to fight piracy, and confirmed for the first time that it is “seriously considering” building an aircraft carrier for its navy — a dramatic increase in its ability to project power on the world stage.

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