Europe / Western countries

The Dark Shadow of Chinese Globalization Falls Over Italy

Police officers in front of a cargo container ship at a port in Qingdao, China, in 2018. (Stringer/Reuters)

China’s ambition is nothing less than world domination through control of maritime trade. NRPLUS MEMBER ARTICLE By quietly acquiring a global network of commercial ports from countries and investors unable or unwilling to maintain their critical economic infrastructure, China has reverse-engineered the logic of conquest: Chinese state-owned companies now control a base network of the sort that previous global hegemons obtained through military victory. Expect China to use the coronavirus crisis to accelerate its efforts to use that economic leverage to pull host countries deeper into Beijing’s political orbit.Advertisement

It’s too early to say that the coronavirus crisis spells the end of globalization, but as the pandemic unfolds, the outlines of a new international trade and political order are emerging in the Mediterranean region. Call it “globalization with Chinese characteristics.”

As the death toll in Italy soared, China flew in a team of medical experts and nearly 30 tons of medical equipment. On a phone call a week later with Italian prime minister Giuseppe Conte, Chinese president Xi Jinping pledged additional supplies and medical personnel. China also shipped medical equipment to Spain, Austria, and the Czech Republic, and millions of protective masks to France, the Netherlands, Greece, and other nations. But the aid was too late. By late March the death toll in Italy had surpassed the total that China was officially reporting, and even the news that the number of cases had dropped for the first time was accompanied by photos of Italian-army trucks carrying the dead on their final journey.

That was not the visual backdrop Italian leaders were seeking less than a year ago when they signed a memorandum of understanding with China, committing Italy to Xi Jinping’s Belt and Road Initiative. Italy also signed nearly 20 related agreements to build new port and road infrastructure, initiate scientific cooperation in space science and satellite technology, boost exports of frozen pork and citrus fruit to China, and tap Chinese investment funds to pay for many of the projects. Despite the wide-ranging commitments agreed to in Rome in March, China apparently did not believe it had any responsibility to tell its new partner that a dangerous virus had been on the loose in Wuhan in December, and that many of the Chinese arriving in Northern Italy during the winter might be carriers. The decimation of Italy’s elderly highlights how China handles partner nations, and it’s a dark future.Advertisement

Receiving less attention are papers and articles in the last few days in which leading Chinese academics and industrial leaders present the virus crisis as an opportunity to make epidemic control a major Chinese export. From surveillance drones, disinfection robots, and AI-powered epidemic-forecasting systems to no-contact technology for online education and new factories to make fabric for protective masks, the virus is a boon for Chinese business. In the People’s Daily, the former head of China’s state cement company, Song Zhiping, wrote that “these areas are bound to become the focus of attention of the entire society and have great potential for development”— as if deaths in Turin were market research for China’s new industry.Advertisement

Song described China’s plan to dominate production of medical supplies, using N95 mask fabric as an example. Song said China, already the world’s largest manufacturer and exporter of masks, produced 5 billion pieces in 2019, including 2.7 billion capable of protecting against viruses, about half the world supply. Demand is highest for the meltblown nonwoven fabric used for medical-grade N95 masks, but only 1 percent of the three million tons of nonwoven fabric made annually in China fits the bill. To help fill the gap, Song said, Chinese state oil company Sinopec built a new meltblown-fabric plant that began operation in early March, capable of producing material for 1.2 million N95 masks each day. Such production, Song said, shows the “Chinese power” in the global anti-pandemic effort. “We need to increase the export” of medical and health supplies and pharmaceutical ingredients to “relevant countries,” he said.Advertisement

Song knows his subject. He previously led the consolidation of the Chinese cement industry into a single colossus, China National Building Material, and claims to be responsible for building more than 300 cement production lines around the world between 2007 and 2017, when he became the first official from a Chinese organization to be appointed head of the World Cement Association. In 2011, Harvard Business School professors wrote a case study pondering whether Song’s effort could succeed. In his first keynote address to the WCA in 2017, Song answered, citing the market power of CNBM, which now controls about 60 percent of Chinese cement production, as an example for the industry to follow.

Such plans illustrate the true nature of Chinese investment. Provision of seemingly humanitarian aid to Italy and other Mediterranean nations is actually a practical move by China to protect some of its largest and most strategically valuable overseas investments and carry out its drive for geopolitical power. In fact, China is taking advantage of the virus crisis to accelerate its use of the economic leverage derived from the global network of ports and logistics infrastructure now under the long-term control of Chinese state-owned enterprises (SOEs). Chinese SOEs have acted in plain sight to assemble this network of commercial maritime power, which includes ports, ships, and landside logistics facilities. Carefully targeting economically weak nations, the Chinese companies bought contracts that grant them the rights to rebuild and manage ports, container-handling facilities, roads, and railways for decades to come. The sellers have been Western governments, pension funds, and port authorities that were no longer willing or able to afford the outlays required to maintain their own critical economic infrastructure

Make no mistake — ports are hard-power assets, the foundation stones of global empires. Chinese SOEs or Chinese-allied companies now control a commercial network that connects the factories of the Pearl River Delta and Hubei province to the major consumer markets through ports in Canada, Latin America, Africa, both Northern and Mediterranean Europe, and, as of last August, the East Coast of the United States. China’s commercial maritime network is far more dangerous than any collection of Belt and Road projects; it’s up and running right now, giving China’s logistics SOEs a say in the economic-development, financial, and trade decisions of major developed countries. The contracts to operate ports and logistics sites run for decades, and China is only now starting to use the influence it has acquired.

Today the main container ports at Valencia in Spain, Vado Ligure in Italy, and Piraeus in Greece — economic lifelines in the globalized world — are controlled by COSCO, the most prominent actor in China’s commercial maritime expansion. Vado was an aging facility until COSCO bought a major stake in the port; the standard package of Chinese cement, cargo cranes, and automation was installed, and in December the revived facility began operations — including the largest refrigerated terminal in the EU, which will help increase exports of pork and citrus. Under these arrangements, China is the arbiter of trade flows for those countries, and COSCO’s mega-vessels are not mere commercial container carriers, but ships of state, carrying Chinese national power to every shore where they dock. That power reduces the ability of countries to object to Chinese policy, to criticize China for covering up the coronavirus that is now decimating the Italian population and claiming hundreds of lives in Spain and France, or to negotiate the terms of China’s medical assistance.

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