Given its global presence, an in situ analysis of the affects of China’s meteoric rise on regional financial systems is often bypassed in favor of shocking one-liners regarding its status in the international marketplace. Pet statistics abound: that China holds $861 billion or more than one fifth of America’s national debt, that China overtook Japan to become the world’s second largest economy (after the United States) in the second quarter of this year, that China has achieved 10 percent year-on-year growth for the past 30 years and is poised to take over the United States as the world’s largest economy somewhere between 2025 and 2030, certainly make an impression.
But there is a more subtle story developing on the Eurasian continent rooted in China’s location at the region’s geo strategic fulcrum.
Once intensely introverted and resolutely autarkic, China is beginning to embrace what Robert D. Kaplan in his May/June 2010 article for Foreign Affairs calls its “blessed geography.” In an attempt to lay the groundwork for commercial relationships with states within its sphere of influence, China’s diplomats have been doggedly pursuing the resolution of border disputes over the full 20,222 km of its boundaries—and have done so to great effect. With India as a notable exception, China, once skittish and dubious about interfacing with its neighbors, now enjoys diplomatic relations with all adjacent states.
China’s core national interest has never been one of friendliness nor moral high ground as ends in themselves. The benefits of friendship, however, are not lost on the, sometimes prickly, politburo.
To wit: Beijing’s investment with unsavory regimes in far-flung locales through Africa and South East Asia, much to the disappointment of the international community. Nevertheless, Beijing, whose diplomatic bedside manner has often fallen short, (In 2002, when asked by a foreign reporter what he thought of the developing threat of a nuclear Iran, then President Jiang Zemin famously replied that he thought peace was good and terrorism bad) is taking a leading role in developing the means for a pan-Asian network, with special emphasis on securing access to the newly discovered mineral wealth in the Middle East.
To do so, China has taken a two-tiered approach, wooing mineral rich states with the combined force of direct investment in untapped resources and, concomitantly, taking a leading role in developing the infrastructure which will allow these minerals to be exported to China in the future.
On its northwestern frontier, China abuts Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan and Pakistan. Demanding more than a quarter of the world’s metal consumption, and already the world’s leading consumer of aluminum, copper, nickel, zinc, iron ore and tin means that the country notorious for its tin-ear has become incredibly conciliatory—benevolent even—in its quest to secure mineral and energy resources. As such, China is now reaching out to its Central Asian neighbors in a manner which—however aggressive—has been remarkably consistent and surprisingly adept.
China’s shared border with Afghanistan is only 74 km in length—the shortest of all contiguously adjoined states. However, the relationship between the two countries is increasingly intimate, and provides an excellent case study in China’s finance-focused regional statecraft.
Motivated by economic survival, China is unconcerned with the heady idealism driving the United States’ prolonged engagement in Afghanistan. And with all the flair of a childless uncle who—uninterested in object lessons and “leading by example”—spoils his nieces and nephews with abandon as the parents (US and allies) silently grind their teeth, China has come out swinging. While the United States has spent billions of dollars embroiled in an interminable war, China is spending its billions developing mines and winning exclusivity contracts.
In 2007, the China Metallurgical Group Corporation, a Chinese State Owned Enterprise (SOE), won the rights to mine deposits in Aynak, a village 30 km south east of Kabul in southern Afghanistan, to the tune of $3.4 billion. Moreover, the winning bid came in at $1 billion more than offers made by other interested competitors, which included mining giants from the United States, Japan and Europe. Was it a splurge? Maybe: but with an insatiable appetite for industrial commodities, failure to secure the mine—which is estimated to provide 11 million tons of copper over the next 25 years—would have been far worse.
Although the details of the transaction remain confidential, China’s offer also included a promise to invest millions more in associated infrastructure projects with the trickle-down effect of creating thousands of new Afghan jobs, building goodwill with the Afghan government and, as a foreign invested entity, a leading source of tax payments for the Afghani government: and all this without the nasty bite of political demands and moralizing quid-pro-quo.
The pronouncement made in June of this year that Afghanistan’s mineral reserves are valued at $1 trillion (much higher than previous estimates), and include precious gems and the world’s last untapped reserves of iron, copper, cobalt, gold and other metals critical to industry has led China to redouble its efforts in the region. Specifically, China is working to develop a functional system of roads within Afghanistan, and to link-up Afghanistan to China’s western frontier.
Undeterred by designations like “High Risk” and “Taliban Controlled,” China Railway Shisiju Group Corp, another Chinese SOE, is building a 53 km road worth $50 million in the Taliban-controlled Wardak province, one of the most dangerous provinces in all of war-torn Afghanistan. China has also been actively engaged in connecting Afghanistan’s 37,000 km national ring road, which encircles the country with other China-financed road projects in the region; China has already linked Afghanistan to a roadway that runs north through Tajikistan, and Kyrgyzstan, terminating at China’s northwestern province of Xinjiang, for example.
In the future, China may seek to build a roadway from Afghanistan through Pakistan to strategic ports on the Indian Ocean.
Despite the fact that China (with the world’s largest standing army of 1.6 million) has repeatedly refused to join the war effort in Afghanistan, investment in projects ranging from developing coal mines to engineering a unified roadway system could be a boon to US-led military counterterrorism efforts by providing infrastructure and a commercial alternative to the opium trade upon which Afghanistan’s economy currently relies. If so, China would indeed have played a hand in providing stability and subsequently, virtue—as the West conceives it – to the region.
Anna Snyder - Former financial analyst at The Balloch Group in Beijing, Ms. Snyder is currently pursuing her MA in International Affairs at the School of International and Public Affairs at Columbia University.
