Chinese subversion has not worked well in countries with strong transparency and oversight

Posted by: | Posted on: May 5, 2021


China often provides economic inducements in illicit and opaque ways that circumvent political processes and institutions. As Chinese companies have increasingly invested overseas, state-owned enterprises or private companies, sometimes with the tacit approval of Chinese officials, have offered bribes and kickbacks to elites in countries receiving investment or aid projects in order to grease the wheels of bureaucracy. At other times, Chinese companies have bypassed the process of competitive bidding and regulatory approval to secure a contract, often at inflated costs, generating extra profits for both Chinese actors and local elites. I call such inducements “subversive carrots.” In many ways, their use reflects China’s domestic political economy, where businesses depend on official connections, corruption is widespread, and few regulations govern foreign investment and foreign aid. My research shows that this method works best in countries that also have little public accountability—where the flow of information is restricted, and political leaders need not worry about public opinion and the rule of law.

Cambodia stands as a case in point. The longtime prime minister, Hun Sen, and his family control the military, the police, and much of the economy. Media outlets are beholden to the government, and journalists, activists, and opposition politicians are routinely silenced through intimidation and violence. As a result, the details of Chinese aid and investment projects in Cambodia are murky, but what information has come out suggests a government deeply corrupted by Chinese influence.

The projects financed by China tend to enrich elites while evicting the poor and degrading the environment. In the southwestern province of Koh Kong, for example, a Chinese investment group is building a massive development complex that is to include a resort, a port, an airport, power plants, manufacturing zones, and roads and highways—all adding up to an estimated $3.8 billion. While Cambodian elites have used the project to line their own pockets, the construction has destroyed ecologically sensitive areas and forced residents from their homes. Beijing may stand to benefit: the resort seems excessively large for the number of tourists the area can attract, but the airport and port appear well designed for Chinese military use.

Xi at the launch of the Asian Infrastructure Investment Bank in Beijing, China, October 2014
Xi at the launch of the Asian Infrastructure Investment Bank in Beijing, China, October 2014Takaki Yajima / Reuters

Such largess has allowed China to buy Cambodian advocacy on its behalf—in particular, regarding its aggressive maritime claims in the South China Sea. At a 2012 summit of the Association of Southeast Asian Nations, Cambodia wielded its position as chair to block discussions of South China Sea disputes, and for the first time in ASEAN’s history, the organization was unable to issue a joint statement. At one point, the Cambodian foreign minister cut off delegates who tried to raise the issue, and at another, he stormed out of the room when they proposed even a watered-down statement. Government officials I’ve interviewed in the region have described Cambodia’s behavior at the summit as the result of a “straight-up monetary deal” in which Beijing paid off the Cambodian government in exchange for its support. In the months before the meeting, senior Chinese leaders visited Phnom Penh, offering additional grants and loans for infrastructure and development projects worth hundreds of millions of dollars. The investment has paid off handsomely: since 2012, ASEAN has become more divided and incoherent, allowing Beijing to consolidate its position, rhetorically and militarily, in the South China Sea.

A similar dynamic is playing out in eastern Europe. The increasingly illiberal governments of Hungary and Serbia have happily accepted handouts in exchange for promoting Chinese foreign policy positions. A high-speed railway running across the two countries, for example, remains shrouded in secrecy, even as costs have ballooned and doubts have arisen about its economic viability. Part of the project is being built by a Chinese state-owned enterprise previously blacklisted by the World Bank for irregularities, and another part, by a corrupt business ally of the Hungarian prime minister. In return, Hungary and Serbia have behaved obsequiously toward China. Hungary has issued official statements echoing Beijing’s position on the South China Sea, and Serbia’s president, in addition to kissing the Chinese flag in gratitude for receiving medical supplies early in the COVID-19 pandemic, has expressed support for China’s repressive national security law in Hong Kong. In Europe, China has plucked the low-hanging fruit, such as public statements and vetoes within the EU, and no country in the region has radically altered its foreign policy orientation. Still, Beijing has managed to dampen international criticism and trigger embarrassing public divisions about issues on which European countries used to be united.

Chinese subversion has not worked as well in countries with greater transparency and oversight. Take the Philippines during the presidency of Gloria Arroyo, who served from 2001 to 2010—a time when the country enjoyed a vibrant media sector and a competitive political system, despite high levels of corruption. Under Arroyo, China agreed to finance and build $1.6 billion worth of railway and telecommunications infrastructure. Many of the projects were awarded through vastly overpriced no-bid contracts. A planned commuter rail line called Northrail, for example, was shaping up to have the dubious distinction of being the world’s most expensive railway per mile. Costs for a national broadband network, to be built by the Chinese state-owned company ZTE, skyrocketed by $130 million to $329 million because of kickbacks to key political players, including the chair of the Philippines’ electoral commission and the president’s husband. As if on cue, in 2005, the Philippines’ national oil company signed an undersea resource exploration agreement that legitimized China’s maritime claims.

Chinese subversion has not worked well in countries with strong transparency and oversight.

Yet all this malfeasance was exposed by the press, and a public backlash ensued. Over the course of 2007 and 2008, the Philippine Senate held 13 public hearings, culminating in a long and scathing report that took Philippine politicians and Chinese companies to task for their corruption. Politicians, activists, and civil society groups organized antigovernment rallies in Manila and other cities. In response, the government suspended and reviewed a range of Chinese-financed projects, and some of the implicated elites were charged and tried in court.

It would be hard to characterize China’s campaign in the Philippines as a success. In 2010, Benigno Aquino III was elected president on an anticorruption platform and proved to be more skeptical of Beijing than his predecessor. Even though the current president, Rodrigo Duterte, has been more eager for Chinese investment, he is still partly constrained by legislators who have pushed for greater transparency and by government agencies that have implemented more stringent review procedures. At the end of the day, the country’s policy on the issue China cares about most, the South China Sea, has remained fundamentally unchanged: the Philippines has stuck to its own territorial claims.

Such fallout is common. In Australia, Beijing used Chinese businesspeople as proxies to make campaign contributions and fund academic institutes in an attempt to persuade politicians and other voices to support China’s positions on the South China Sea and human rights. The backlash was swift: in 2017, a prominent politician who allegedly accepted Chinese money and was seen as toeing the Chinese line was forced to resign, and the following year, Australia’s Parliament tightened the country’s laws on foreign political interference. In 2015, the president of Sri Lanka was voted out of office after greenlighting billions of dollars’ worth of unsustainable and corrupt Chinese infrastructure projects, and three years later, the same fate befell the president of the Maldives.

Something similar happened in Malaysia in 2018. The incumbent prime minister, Najib Razak, was mired in corruption scandals over the mismanagement of Malaysia’s state investment fund, some of which implicated Chinese-financed investments in which contract costs were inflated to cover the fund’s debts. Voters dealt his party a resounding defeat in elections that year, forcing him from office and marking the first opposition victory in Malaysia’s 61 years as an independent country. His successor, Mahathir Mohamad, quickly suspended a number of projects, renegotiated plans for a major railway, and spoke out vocally against Beijing’s actions in the South China Sea—unlike Najib, who has been sentenced to 12 years in prison. Time and again, China’s subversive statecraft has run aground on the shoals of accountable political systems.

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