CHINESE COMPANIES & DIPLOMACY

Dr. Tarcisius Kabutaulaka, Honolulu, Hawai’i
In order to understand China’s growing and assertive influence in Oceania, there is a need to understand how Chinese companies operate and their impacts on diplomacy, economy, politics and the livelihoods of people.

These companies are often at the forefront of Pacific Islands governments and communities’ encounter with China – they usually precede the Chinese state. Furthermore, they are central to China’s geo-economic, geopolitical and geo-strategic influence.

In the past decade there has been an increase in the volume and value of Chinese foreign direct investments (FDI) in Oceania. Chinese firms, including state-owned enterprises (SOE) and private companies, invest in a variety of sectors including natural resource extraction, infrastructure development, telecommunication, energy, manufacturing, and retail businesses. This reflects China’s needs as well as Pacific Islands countries’ need to fuel their economies.

The Chinese SOEs comprise well-known companies such as the China Harbour Engineering Company (CHEC); China Civil Engineering Construction Corporation (CCECC); China Railway Engineering Corporation (CREC); China Railway Construction (CRC); Huawei; Sinopec; Metallurgical Corp of China (MCC); Zijin Mining Group Ltd.; Zhongrun International Mining Company Limited; Xinfa Aurum Exploration Limited; and, China Construction Science and Industry Corporation (CCSIC) amongst others. There are also privately-owned companies as well those that exist in the gray area between private and SOEs and an increasing number of investments by overseas Chinese citizens, especially in the retail sector.

Chinese companies contribute, not only to the commerce, but also play an important role in Beijing’s international diplomacy, especially in promoting the One Belt One Road (OBOR) initiative – also known as the Belt and Road Initiative (BRI) – which President Xi Jinping established in 2013 and which has become his signature foreign policy initiative. Oceania has been linked to the 21^st Century Maritime Silk Road (MSR) component of the OBOR initiative.

Eyck Freymann identifies three aspect of the OBOR initiative: (i) the diverse set of investments and construction projects that Chinese firms have undertaken overseas; (ii) a concept for branding Chinese power and expanding global influence; and, (iii) the use of the OBOR initiative brand and a celebration of Xiʻs leadership by individuals, companies, and institutions to advance their interests and relationships, but which helps promote China and the OBOR initiative.

Chinese companies are therefore often at the forefront of Chinese diplomacy. They usually precede or exist in parallel with the Chinese state and exert – or at least try – influence. For example, in April 2020 when the PNG Government rejected an application to extend the lease for Porgera Gold Mine, a representative of the Chinese company Zijin Mining – one of the major partners in the operation along with Canadian company, Barrick Niugini Ltd. – warned the PNG Government it faces “significant negative impact” on bilateral relation with China.

There are instances when Chinese companies become a liability to Beijing because of their poor reputation as a result of bad practices and the failure to follow regulations in the host country. That in turn portrays negatively on the Chinese state, which often distances itself from the company.

That is the dominant story with companies in natural resource extraction, such as Zijin Mining Group’s operations in Porgera, Metallurgical Corp of China’s Ramu Nickle mine in PNG, or the smaller companies involved in logging in Solomon Islands. Meanwhile, in Fiji, Xinfa Aurum Exploration Limited’s bauxite mine in Vanua Levu and Zhongrun International Mining Company Limited’s Vatukoula Gold mine have not received the same degree of negative publicity.

It is worth noting that Chinese companies are often responsive and make appropriate changes if the host government is strict in enforcing its regulations. There is therefore as much responsibility on the host government as it is on the company. Also, Chinese companies are not the only ones with bad practices, as we have seen with Rio Tinto’s operation of the Bougainville Copper Ltd. and the pollution of the Jaba and Kawerong rivers.

But Chinese companies, like those from elsewhere, need to understand Pacific Islands cultures and respect the laws and regulations of these countries.

The relationship between Chinese companies and the Chinese State is an important one to understand. The dominant narrative is that all Chinese companies are owned by, or linked to the Chinese state. That is not entirely true.  

I am not saying that Chinese companies are either good or bad. They are here, and we must engage with them in ways that maximize the benefit to us.

To do that, it is incumbent on us to have intricate knowledge of these companies: their organizational structures, links, histories of their operations, the nature of their operations, etc. Only then can we successfully engage with them.

The operations of Chinese companies – like those from other countries – have a direct impact on Pacific Islands countries’ economies, politics, communities and the livelihoods of our people. These impacts can be both positive  and negative. It is up to us to ensure it is positive.

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