The Limits Of Chinese Expansionism

By Shawn W Crispin
December 23, 2010
Courtesy Of "Asia Times Online"

BOTEN, Laos - On a November evening in this northern Lao border town, a crowd gathered around a traffic accident between two Chinese drivers. As tempers flared, Chinese casino guards moved tentatively to keep the peace. But the absence of any uniformed Lao police officers underscored the authority gap in a growing number of areas in the country where Vientiane has effectively ceded sovereignty to Beijing.

Chinese investors have built and run a sprawling casino complex at Boten, one of two special economic zones dedicated to gambling where China maintains administrative autonomy. At Boten, front desk hotel staff speak only Chinese, the yuan is the required currency of settlement and Chinese prostitutes peddle their services on business cards printed in Mandarin rather than Lao. At the other, outside the town of Huay Xai, Chinese cars travel without license plates.

The special concessions are quid pro quo for the official aid, grants and non-interest loans Beijing has given in recent years to Laos to finance badly needed and trade facilitating infrastructure. The assistance has been widely referred to as China's "soft power", a diplomatic gambit aimed at changing perceptions about China in a Southeast Asian region that has often viewed its giant northern neighbor more as a strategic threat than economic opportunity.

Buoyed by rising economic clout and driven by a 2001 policy initiative known as zou chu qu, translated literally "to go out", China's fast-evolving model of capital expansionism is starting to raise questions about the sustainability of that outward drive. With its national coffers overflowing from decades of trade surpluses, China's foreign investments are expected to grow exponentially in the years ahead, particularly into contiguous, resource-rich Southeast Asia.

But Chinese foreign investments now come with big strings attached, including allowances to import unskilled Chinese labor for Chinese-funded projects in countries often desperate to create jobs for their own. Nowhere is that more apparent than in Southeast Asia's less developed states, where China's generous financial aid has influenced government policies in Beijing's favor. It is significant that China has made its deepest investment inroads in states governed by similarly authoritarian regimes, namely Cambodia, Laos, Myanmar and Vietnam.

Strong and unaccountable governments have allowed for state-sponsored land grabs and forced village relocations to pave the way for many Chinese investments, especially in extractive industries and plantation agriculture. An entire village was forcibly moved to a barren relocation site to make way for the Chinese special economic zone outside of Huay Xai. That's leading some in the region to associate Chinese investment with corrupt government practices, rising perceptions that are motivating the first nationalist stirrings against Chinese expansionism.

New Gateways

To be sure, China's economic rise has had an unmistakably positive impact on Southeast Asia's small transitional economies. New and improved roads and other infrastructure have opened important new gateways for trade and commerce. That's included Chinese financial assistance to build the Lao segment of the Great Asian Highway, which if completed on schedule in 2012 will connect Beijing to Singapore and transform Laos from land-locked to land-linked status.

Chinese-financed roads into previously remote areas along the Mekong River in the country's impoverished northern regions have allowed Lao authorities to extend the electricity grid to villages visited by this writer that until just months ago lacked a consistent source of power. The electricity will be supplied by hydropower dams recently built along three northern Lao rivers with the assistance of Chinese financial credits.

As Southeast Asia's smallest and least-populated state, Laos is most vulnerable to China's growing economic might and Beijing's presence and influence is expected to grow, according to Martin Stuart-Fox, a renowned Laos expert. Indeed, Laos is fast emerging as a greenfield model for the form Chinese capital expansionism may take across the region and beyond as Beijing revs up its investment drive.

In a 2008 academic paper, Stuart-Fox argued that China expects three things in return for its aid, loans and grants to Laos, namely: backing for Chinese policy from everything to Taiwan to Tibet; access for Chinese companies to exploit Lao resources; and lines of communication though Laos to Thailand - all of which Laos has loyally provided.

More recently, however, its become clear that China expects more for its generosity, including exclusive economic enclaves and long term leases for projects - including a to-be-built new Chinatown in downtown Vientiane - that some analysts believe will pave the way for bigger waves of Chinese migration into Laos. As of 2007, the Lao government estimated there were 30,000 Chinese residents living in Laos, a human statistic Stuart-Fox described as a "gross underestimate" in his research. Nonetheless it represented a tripling of the 1997 estimated figure.

Journalist and author Bertil Lintner argues in a forthcoming book that China's economic boom and rapid infrastructure development have spawned a new outward wave of Chinese migration, one of potential historic proportions. His research shows how outward Chinese investment often acts as a front for state-backed outward migration to relieve population and resource pressures at home.

(Because less than 7% of China's land is arable, food security for its 1.3 billion is a major policy concern.)

The outward migration of capital and labor, however, is being complicated by a new sense of Chinese exceptionalism, a phenomena both Lintner and Stuart-Fox note in their studies and one clearly on display in China's special economic zones in Laos.

Stuart-Fox writes that Chinese newcomers have "little in common with the older Sino-Lao community" which integrated more readily in their newfound homes and that "most have little sensitivity towards Lao culture". He characterized the new generation of Chinese migrants in Laos as "brashly nationalistic".

Lintner has identified a similar nationalistic strain in his research of Chinese expansionism in the South Pacific, where Chinese communities have recently come to dominate local commerce on several islands and faced violent backlashes as a result. He notes violent reactions against certain Chinese investments into Myanmar, where Chinese traders have come to dominate trade in towns as large as Mandalay.

A recent unexplained explosion at a Chinese-funded hydropower power project in the ethnic Kachin area designed to supply power to southern China is one example. Around 10,000 inhabitants of the area where the dam was built were forcibly evicted, Lintner notes.

Exploitative Expansion

In northern Laos, China's expansion is especially visible in the mountainous areas south of Boten, where once forested areas have been cleared for monoculture rubber plantations managed by Chinese companies. Those companies frequently receive tax waivers and subsidies from Beijing as part of a wider policy to combat opium cultivation and better integrate remote Lao and Myanmar border areas into wider regional markets, according to the Transnational Institute (TNI), a Netherlands-based international network of researchers and activists.

In a November briefing paper, TNI wrote that while "initially informal smallholder arrangements were the dominant form of [rubber] cultivation in Laos, the top down coercive model is gaining prevalence" and that "the poorest of the poor ... benefit least from these investments. The study also noted that many Lao agrarians "were losing access to land and forest" and "were being forcibly relocated to lowland areas that offered few viable options for survival" to make way for Chinese plantations.

TNI concluded that "new forms of conflict are arising from Chinese large-scale investments" in both Laos and Myanmar and that "related land dispossession has wide implications on drug production and trade, as well as border stability." It claimed that China's approach "is perceived by the local communities and international development agencies as for profit only, and they question the sustainability of the Chinese approach. The image of the Chinese government and people in these regions has consequently suffered."

There are questions about how far China has gone to manage its investment image. Sompawn Khantisouk, the owner of an ecotourism resort in northern Laos, was abducted in 2007 by men believed to be local police officers and still has not been accounted for. Sompawn's disappearance coincided with his efforts to mobilize local villagers against Chinese-sponsored rubber plantations in areas used for ecotourism. Sompawn's resort had won several awards for its contribution to sustainable ecotourism, once a top government policy priority.

Nationalistic bloggers in Vietnam have campaigned against a government concession given to a Chinese company to mine bauxite in the country's picturesque Central Highland's region. The company has imported thousands of Chinese laborers to work the mine, according to reports. Four of the five political bloggers currently imprisoned in Vietnam are being held for criticizing Hanoi's perceived accommodative polices towards China rather than calls for more democracy.

In an apparent move to forestall similar criticism in Laos, China has worked hand-in-hand with the Ministry of Communication and Transport to establish a new Lao National Internet Center, which will come on-line in 2011. The center's Lao staff have undergone extensive training in China, including members of a newly created "security emergency response" team, according to a source familiar with the situation. Beijing has also supplied the technological equipment that will be used to monitor and block web sites, the source said. Currently, Laos does not censor the Internet.

Because of the lack of free media in the Southeast Asian countries where China is most heavily invested, it's difficult to ascertain whether the still faint voices of dissent are marginal or representative of a genuine nationalist groundswell of anti-China sentiment. But if China is indeed involved in the suppression of these voices, as many suspect, then Beijing too must realize the risks and flaws in its fast-growing capital expansionism.

Shawn W Crispin is Asia Times Online's Southeast Asia Editor.

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