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What is the Chinese regime's strategy to buy strategic islands

In the context of the overall shift towards greater state control over Chinese society and economy, the Xi Jinping regime is instructing state conglomerates to act in support of their foreign policy objectives.

Newsroom Infobae

April 11, 2022

FOTO DE ARCHIVO: Las banderas nacionales de las Islas Salomón y China ondean en la Plaza de Tiananmen en Pekín, China el 7 de octubre de 2019. REUTERS/Stringer

More and more Chinese investors, mostly little known, are trying to buy large portions of land in strategic areas, often near US allies or military installations, on islands along strategic maritime communication routes or overlooking important straits and canals.

The most recent case came out last week, when the draft of a China-Solomon Islands security alliance that has caused chills across the South Pacific was leaked online, with many countries worried that it could trigger a large-scale military build-up.

The draft agreement says that Chinese warships could stop in Solomon Islands to “logistically replenish” and that China could send police, military personnel and other armed forces to Solomon Islands “to help maintain social order.”

Both China and Solomon Islands have strongly denied that the new pact will lead to the establishment of a Chinese military base. The Solomon Islands government said the pact is necessary because of its limited ability to deal with violent uprisings such as the one that swept the archipelago in November. But Australia, New Zealand and the US expressed alarm over the agreement, and New Zealand Prime Minister Jacinda Ardern described it as “gravely worrying.”

But the most striking part of the pact was the role of Xu Changyu, vice president of China Sam Enterprise, a group that produces weapons and has connections to the Chinese Ministry of Defense. This businessman for at least three years had been seeking strategic swaths of land on the islands, according to the Financial Times, preparing the ground for the Xi Jinping regime.

El primer ministro de las Islas Salomón, Manasseh Sogavare, y su homólogo de China, Li Keqiang (REUTERS/Thomas Peter)REUTERS

Euan Graham, senior researcher at the Singapore-based International Institute for Strategic Studies, told AP that China has been looking for such a port facility for about five years, as it aims to expand its naval presence in the South Pacific as part of the long game of Beijing to become the dominant regional power.

“If they want to break into the Pacific, at some point they will need the logistical capacity to support that presence,” Graham said. “We're not talking about war plans here; it's really about extending their presence and influence.”

The case of Solomon Islands also clearly shows the complicated way in which Chinese companies sometimes act in tune with the Chinese regime and its geopolitical ambitions.

“You could say that these Chinese companies are like the British East India Company of our day,” said a diplomat from Southeast Asia. “They are the vanguard of their nation's push into new markets and new spheres of influence.”

In fact, the case of Solomon Islands is only the last one. The Financial Times examined dozens of similar ones.

Possibility of interfering with US naval operations

Some of the Chinese companies have done business in countries that do not even have a Chinese embassy because they maintain diplomatic relations with Taiwan, an island that Beijing claims as part of its territory.

Solomon Islands, home to some 700,000 people, changed diplomatic recognition from Taiwan to Beijing only in 2019, a measure rejected by the most populous province and a factor that contributed to the unrest that broke out last November.

La gente camina por el distrito de Chinatown de Honiara en las Islas Salomón el 26 de noviembre de 202, tras los violentos disturbios que arrasaron la capital (Foto de CHARLEY PIRINGI / AFP)CHARLEY PIRINGI | AFP

China, however, had become its biggest trading partner much earlier, thanks to the presence of key Chinese companies such as China Civil Engineering Construction Corporation, a state-owned contractor.

Thus, Solomon Islands would give China the potential ability to interfere with US naval operations in the region, which could be crucial in the event of a conflict over Taiwan or in China's south and east seas.

Lieutenant General Greg Bilton, Australia's chief of joint operations, said that if Chinese naval ships could operate from the Solomon Islands, “it would change the calculation.”

“They are much closer to the Australian continent, obviously, and that would change the way we would conduct daily operations, particularly in the air and at sea,” he told reporters last week.

The cases of Central America

A similar pattern can be seen in Central America and the Caribbean, where Taiwan has some of its last diplomatic partners.

The British media cites the case of El Salvador, where Asia-Pacific Xuanhao (APX), a Chinese conglomerate, proposed in 2018 to lease La Union, a port originally built with Japanese money, for 50 years and expand it. At the same time, the Chinese government was negotiating for the country to change its recognition from Taipei to Beijing.

APX subsequently expanded its proposal to include the construction of a series of special economic zones, which would require a 100-year lease over nearly one-sixth of the country's territory and half of its coastline, according to APX submissions reviewed by the FT.

Salvador Sánchez Cerén, expresidente de El SalvadorEuropa Press

Although El Salvador's then-President Salvador Sánchez Cerén pushed for tailor-made legislation to make the proposal possible, El Salvador's parliament banned the sale of islands to foreign investors, blocking control over key areas of the Gulf of Fonseca coast.

However, other Chinese investors have tried to help boost the economic zone project. According to government documents and local news, Yang Bo, a Chinese-born merchant and investor who arrived in El Salvador after Beijing's bloody repression of the 1989 student movement in Tiananmen Square, acquired more than half of the land on Perico Island, an island near the port theoretically covered by the ban.

The persistent push of different Chinese actors for what would be the long-term control of large tracts of land has sparked intense debate about what these companies really want.

“We have seen Chinese non-state actors move in unison to help China gain economic and political influence in Central America,” Evan Ellis, professor at the Institute for Strategic Studies at the U.S. Army War College, who follows China's commitment to Latin America, told the Financial Times. It considers that approaches such as those of APX and Yang are part of China's strategic plans to develop trade routes through Central America as alternatives to the Panama Canal.

However, other analysts, executives and diplomats said that considering Chinese companies as a mere facade of Beijing's geopolitical or military interests is too simplistic.

Strategic sea lanes

The FT reviewed more than 30 reports of Chinese proposals for large-scale development projects around the world over the past decade, including Chiquita and Grande, two islands off the western coast of the Philippines in the South China Sea to Daru, an island in the narrowest of the Torres Strait that separates Papua New Guinea from northern Australia.

In August 2019, Fong Zhi, a joint venture between a Chinese real estate conglomerate and ethnic Chinese investors in the Philippines, offered to acquire control of Fuga Island in the Luzon Strait and build a “smart city” there.

Located in the channel that separates the southern tip of Taiwan from the northernmost Philippine territories, Fuga is highly strategic, as both the People's Liberation Army (PLA) ships and those of the United States and its allies pass through it as they transit between the South China Sea and the Pacific.

Finally, the Philippine military demanded a review of the proposed investment and have since announced plans to build their own naval station in Fuga.

Another example is that of the Chinese company that operates a $3.8 billion economic development zone in Cambodia, which occupies one-fifth of the country's coastline and includes an airport with a military-grade airstrip. UDG, the Cambodia-registered project company, is owned by Tianjin Union Group, whose parent, property developer Wanlong Group, is controlled by a family consisting of one of its parents and four siblings with two other partners.

Personal de la Guardia Costera de Filipinas a bordo de un bote de goma mientras navegan cerca de embarcaciones chinas que se cree que están tripuladas por personal de la milicia marítima china en Whitsun Reef, Mar de China Meridional (Reuters)via REUTERS

A Chinese base in Cambodia would establish a bottleneck in the Gulf of Thailand near the crucial Strait of Malacca.

China also financed projects in Gwadar in Pakistan, another close ally, and in Sri Lanka, where Chinese infrastructure loans forced the government to hand over control of the southern port of Hambantota.

Especially intriguing has been a supposed Chinese push to establish a base in the West African nation of Equatorial Guinea. That would give China a presence in the Atlantic off the east coast of the continental United States, as well as in a major oil-producing region of Africa.

Companies related to the scheme

While many of these projects did not succeed or are in question, the analysis carried out by the Financial Times together with analysts from Janes, an open-source intelligence group, showed two elements in common with potential Chinese contractors: they are private companies controlled by a small number of shareholders , often members of a family, and have close ties with the Chinese security forces or other parts of the State apparatus.

According to tender documents and Chinese media reports, APX is a supplier of night vision goggles, telescopes and listening equipment for the People's Liberation Army and the Paramilitary People's Armed Police.

Likewise, China Sam Enterprise Group has deep state and military ties.

Analysts say that, in the context of the overall policy shift towards greater state control over the entire Chinese society and economy, the Xi Jinping regime is instructing state-owned enterprises more strictly to act in support of its foreign policy objectives.

El presidente chino Xi Jinping (REUTERS/Florence Lo)REUTERS

Even ethnic Chinese abroad who are not even citizens of the PRC can be recruited by Beijing to boost their economic diplomacy.

“The other pattern we see is that members of the local Chinese community abroad are being taken advantage of and can play a crucial role,” said Claire Chu, senior analyst at Janes, referring to Yang in El Salvador. Apart from the purchase of land for the proposed special economic zone, Yang has also received trade and investment delegations from China on behalf of the Chinese embassy.

Nor is it a coincidence that the regime targets developing countries for its ambitions: in many cases the governments of many of these countries lack sufficient knowledge about the responsibilities and financial powers of the various Chinese institutions, both private and public, to understand with whom are trying.

China also takes advantage of the institutional weakness of many of these nations. Matthew Wale, legislator and leader of the Democratic opposition party in the Solomon Islands, summed it up: some members of parliament, he said, “have been bought by Chinese companies.”


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