Chinese companies backed by their government’s privileged access to state capital finance, build, and operate numerous ports around the world. These operations generate a series of enormous risks for host port states, a recent report published by peer-reviewed journal Marine Policy indicated.
Over the past decade, China has made significant investments with its Belt and Road initiative in overseas port development projects. Chinese investments disrupt market principles and pose economic, strategic, and political risks.
“China continues to invest to control foreign ports,” Latin America expert Luis Fleischman, a sociology and political sciences professor at Palm Beach State University in Florida, told Diálogo on July 19. “In Panama it has a strong presence and is negotiating with several Latin American countries for all kinds of navigation processes in order to have strategic advantages.”
Marine Policy identified four such risks: port overcapacity, military entrapment, commercial and military espionage, and economic coercion. Chinese government-led investments carry a unique risk profile, distinct from private direct investments, the journal indicated.
Chinese funding driven by political pressure as opposed to purely for commercial reasons can lead to oversupply in recipient port states. For example, Sri Lanka’s $1.5 billion Hambantota Port had a low operation in 2018, handling only one ship a day, generating annual losses of about $60 million, Marine Policy said.
The island government was forced to hand over the Hambantota Port to a Chinese state-owned company on a “99-year lease” due to its inability to repay its debt to China and underperforming port infrastructure, Voice of America reported.
These ports are considered dual-use assets, exposing port countries to unique risks. If the assets of Chinese companies are in a People’s Liberation Army Navy (PLAN) battle plan, from supply to direct combat support, the port-state could be trapped, Marine Policy indicated in its report.
If it supports combat operations, China’s opponents could see it as an enemy and could be targeted, the journal added. If it rejects combat operations in its territorial waters, Beijing could consider it a threat and respond with economic, diplomatic, or military retaliation.
Many of the seaports developed by Chinese state-owned enterprises meet minimal military requirements, such as dry docks for repairs, berthing depths of at least 10 meters, and a dock large enough for the PLAN’s largest ships, the journal continues.
“China’s presence in these ports would not even allow the United States [or other powers] to come to the defense of those countries, which would be threatened in some way or another,” Fleischman said.
Commercial and military espionage
Military nexus in foreign ports controlled by China poses espionage risks for port countries. A PLAN battle plan could use state-owned enterprise facilities to obtain information on ships, crews, and cargo, posing a danger to global security, Marine Policy said.
Chinese entities that collect and process this data create both commercial and military risks for the receiving state, it added. Espionage can be used to track shipments of military equipment and gain commercial advantage, as well as identify vulnerabilities in the industrial strategies of port states.
“There is a Chinese document that talks about the importance of expanding at the naval level and it also talks about U.S. naval power that is unprecedented in history and that’s where China wants to go, to control the seas,” Fleischman said. “Having access to foreign ports is critical for China on a military and strategic level — the economic stuff, they’ve already outgrown.”
When Chinese state-owned companies control port assets abroad, Beijing can use that leverage to threaten to halt operations at the port country’s expense. This gives China, through its investments, economic leverage over these countries, Marine Policy indicated.
It also creates a risk for governments, as they may face a dilemma between their economic prosperity and their sovereignty if China seeks concessions. Countries that depend on Chinese investments may find themselves in a complicated position of having to balance their commercial interests with their political autonomy.
These investments are in 191 ports in 88 port countries, several of them in Latin America, says Marine Policy.
It is incumbent upon democratic countries to take proactive steps to prevent the development of Chinese military bases around the world. On July 11, 2023 the North Atlantic Treaty Organization (NATO) criticized China in a statement.
“This announcement is important and unprecedented because until now NATO has not spoken out about China,” Fleischman said. “China seeks to destabilize the international order, spanning the space, cyber, and maritime domains,” the statement said.
“China’s stated ambitions and coercive policies challenge our interests, security, and values,” Fleischman added.
NATO leaders expressed concern about China’s attempts to “control key technological and industrial sectors, critical infrastructure, and strategic materials and supply chains,” as well as its quest to “create strategic dependencies and increase its influence.”
“Now what is interesting is that it is not only the United States that is seeking to curb this Chinese expansion outside the international order, but Europe and NATO also joined in. This indicates the concern generated by this whole Belt and Road thing,” Fleischman concluded.