13 November 2010
China’s funding of Sri Lanka's Hambantota port development, and similar projects in other countries, has been interpreted by some Western and Indian analysts as part of a grand geostrategic design.
The ‘string of pearls’ argument, first made by a few US military analysts, has not only become explanation for, but also ‘evidence’ of, China's supposed military ambitions in the Indian Ocean.
This logic, while ignoring important related developments elsewhere, has also prevented serious consideration of alternative explanations.It cannot, for example, account for China investing seven billion dollars to develop three other ports in … Italy.
Hutchison Whampoa, a Fortune 500 Chinese company, is investing €500-million in developing Italy’s southern port of Taranto, state-owned Cosco is expanding the port of Naples, and HNA, a Hainan-based aviation and logistics group, is in €3bn talks to build a terminal near Civitavecchia, north of Rome, The Guardian and Financial Times reported.
The rationale? According to the FT, veteran China-watchers believe Beijing intends to build a strategic gateway into Europe through Italy, and to a lesser extent Greece.
In other words, old fashioned commercial interests.
As one diplomat put it, the actual “national security concern” driving China’s investment in ports from East Asia to Europe is simple: “an obsession with controlling the whole chain of production.”
That means ensuring raw materials and components can flow in, and finished goods flow out, fuelling China’s spectacular growth.
(See the special issue of Hewlett Packard’s HP Government Journal on supply chains and logistics, especially the article on ‘The Global Government Supply Chain’).
In short, world’s existing ports may in future not be able to meet the Chinese economy’s massive, and growing, logistic needs (both import and export).
For example, this year the Shanghai port overtook Singapore in terms of container throughput, according to Lloyds. However, crucially, whilst Shanghai mainly handled China’s exports from the Yangtze River Delta, Singapore mainly provided transhipment services for cargoes for the countries in southeast Asia.
All but two of the world’s world’s busiest ports in 2009 were in Asia. China is home to nine of the top fifty.
China's exports and imports are almost entirely dependent on sea transport. That means the global highway must expand – for China and its trading partners.
If in the coming decades the smooth flow of future Chinese imports and exports vis-à-vis North American, European and other markets is to be assured, more – and bigger – ports are vital.
And, at the same time, other states' trade with the massive Chinese economy will rely on the same commercial routes.
The Italian ports, for example, will directly benefit Italian and other European firms eager to participate in China's economy. Fiat, for example, is keen to expand not just sales, but manufacturing in China. “Italian oil and green-energy companies would love greater access to China, as would Italy’s surprisingly large banks and insurers.” The Guardian also reported.
The 'string of pearls' argument is both built on the assumption that China wants to 'challenge' other navies in the Indian Ocean and 'dominate' the sea lanes, and at the same time constitutes the supposed 'evidence' for this.
It simply ignores the heavy interdependence of the economies of China and many other large states, both developed and developing. Material may flow along sea lanes, but only because of a thick web of myriad economic interconnections between companies, investors, financiers and states.
Trading flows between China and countries in Asia, the Middle East, Africa and Latin America – i.e. quite apart from those with developed regions – are today credited with holding the world economy together, according to an analysis by Bloomberg.
These ties form what economists at HSBC Holdings Plc and Royal Bank of Scotland Group Plc call the “new Silk Road” - a $2.8-trillion version of the Asian-focused network of trade routes along which commerce prospered starting in about the second century.