Why some countries are concerned over Chinese investment

Was it China-phobia that recently forced Britain and Australia to postpone or cancel Chinese investment in their sensitive sectors? The two countries seem to be genuinely concerned about national security issues linked to these investments while China dismisses their fears as unfounded and absurd.     

 In its two opinion pieces published on August 11 and 18, Xinhua, the Chinese government’s official press agency, accused Great Britain and Australia of China-phobia and warned both the countries that their China-phobia could damage cooperation with Beijing.

he logo for Australia's biggest electricity network Ausgrid adorns the headquarters building in central Sydney

The logo for Australia’s biggest electricity network Ausgrid adorns the headquarters building in central Sydney, Australia, July 25, 2016. REUTERS/David Gray/File Photo

Though China-phobia or Sino-phobia has long been surfaced in some circles, this is probably the first time a key Chinese news agency has publicly mentioned it.

This came following the United Kingdom’s postponement of a $23.5 billion nuclear power station project at Hinkley Point, to which China General Nuclear Power(CGN) is supposed to finance a third, and Australia’s rejection of the sale of Ausgrid, its largest electricity network, to Chinese state-owned State Grid Corp and Hong Kong-based Cheung Kong Infrastructure.

Judging by Xinhua’s reaction, from Beijing’s viewpoint, China-phobia exists in Great Britain and Australia. The questions are whether such an anti-China sentiment really exists in these two countries, and if any, why it comes about.

China’s actions and intentions

Xinhua’s first piece opened with a remark that “given China’s dramatic development, huge population and unique culture, it is understandable for some countries to have concerns over China’s role and impact on the world.”

However, its writer warned “such concerns, if brewed in fear and bias, could transform into a toxic mind-set of China-phobia and blockade win-win cooperation.”

The concerns “brewed in fear and bias” that the writer commented on and consequently denounced as “ridiculous”, “absurd and almost comical” are Great Britain and Australia’s “national security” concerns over Chinese investment in their critical infrastructures.

Hinkley Point B Power Station in Bridgwater, southwest England

Hinkley Point B Power Station in Bridgwater, southwest England

The second piece regarded Great Britain’s “national security” concerns over China’s investment into the Hinkley Point plant as “groundless” and “unnecessary” and argued that “London’s misgivings over Chinese involvement in its key infrastructure is yet another stroke of China-phobia.”

These comments raise a number of points that are noteworthy. One of these is the view that “China’s dramatic development, huge population and unique culture” are a source of concern for countries, e.g. Australia and the United Kingdom. In fact, this seems just the opposite.

China’s drastic rise has benefited not only its population but also many other countries. Its economic dynamism has brought significant profits to regional countries, such as Southeast Asian countries and Australia. China has now become their biggest trading partner and one of their top investors.

Australia, Great Britain and other countries around the world have sought to establish and enhance their economic and commercial cooperation with Beijing because the nearly 1.4-billion-people country is the world’s largest market.

Yet, while regarding their ties with China as important and even essential, some nations may have some reservations and concerns over Chinese investment. This is partly due to China’s economic and political system and the intentions and behaviors of both the Chinese government and Chinese companies in international affairs.

China’s threat has been long and widely discussed. Such a perception or apprehension has come about not only because of China’s meteoric rise but rather because of concerns over the way Beijing has used or will use its new-found power. Its behaviors, especially in recent years, have apparently compounded this anxiety.

From China’s standpoint, the UK and Australia’s “‘national security’ concerns over its investments into their key infrastructure are “ridiculous”, “absurd”, “groundless” or “unnecessary”. However, for these countries, such cautions or concerns are neither “ridiculous” nor “groundless” or “unnecessary”.

In explaining why his government decided to block the $7.7 billion sale of Ausgrid to the two Chinese companies on national security grounds, Australian Prime Minister Malcolm Turnbull said he “can’t disclose the advice given to us by the national security agencies for obvious reasons.”

But Turnbull was quoted by Australian media as saying that what he could assure “is the advice we received was absolutely unequivocal. This was not a political decision.”

With regard to the reluctance of Great Britain’s newly elected Prime Minister Theresa May to approve the Hinkley Point project, concern over Chinese involvement in one of its key infrastructures is a factor behind her hesitation.

By and large, the UK’s media and public have so far supported her decision to postpone – and even to cancel – the project.

For instance, in its editorial on August 11, the Guardian gave a number of reasons to explain why hesitation over the Hinkley Point project is related to wider questions about Beijing’s intentions and actions. One of these is China’s industrial espionage. It pointed out that CGN and it engineer, Allen Ho, were charged by the US government over nuclear espionage.

The newspaper also noted that “China and western countries have different values and beliefs about the rules by which companies and countries play”, that in China “the line between state and commercial actors and interests is blurred” and that “foreign businesses in China complain of an increasingly hostile atmosphere.”

Given these, it argued that while it is “right and sensible to seek engagement with the world’s second largest economy … it is also sensible to scrutinize and manage foreign investments carefully … acknowledging the challenges they pose.”

Independent, another major British newspaper, while acknowledging that “China’s general outlook on the world is peaceful and friendly” and that “China has few, if any, direct quarrels with Britain”, urged Britain to “be cautious about the extent of” its cooperation with Beijing.

The reasons it gave to explain why the UK “should be cautious of Hinkley Point” in its leading article on July 31 included China’s “emergence as a military as well as industrial force, its special position as an east Asian superpower, and the extravagant territorial claims it makes in the South China Sea”, which the newspaper regarded as “a direct challenge to her neighbors, and their ally, the United States.”

China’s overreaction and warnings

As China has become more powerful, it seems its officials and media have increasingly reacted disproportionately – often angrily and aggressively – to postures and decisions taken by other countries. Such an overreaction has not always been well received. It has even backfired on China.

In response to the call on China to respect the South China Sea ruling by the US, Japan and Australia, the Global Times, a subsidiary of the Chinese Communist Party’s People’s Daily, called Australia a “country with an inglorious history” and threatened to “take revenge”, warning that if the latter “steps into the South China Sea waters, it will be an ideal target to … strike.”

Given its vehement objection to the South China Sea arbitration, China’s strong criticism of the call by Australia, Japan and the US is somehow understandable. However, using such a langue to insult and threaten a country that calls for the respect of an international ruling is unacceptable to many.

It is unclear whether this influenced Australia’s decision to block the Ausgrid sale to China’s State Grid Corp. However, it is possible that Canberra may have felt uncomfortable and insecure to sell its biggest energy grid to a country that regards it as “paper cat” and threatens to strike it if it is involved in the South China Sea disputes.

Though his tone is much less aggressive and threatening than the Global Times’, Liu Xiaoming, China’s ambassador to the UK, wrote in the Financial Times on August 8 that “the China-UK relationship is at a crucial historical juncture” due to London’s deferral of the Hinkley Point nuclear power project.

In an indirect but sternest way, he warned that the cancellation of the project would be likely to jeopardize China’s other planned investments in the UK.

However, in its leading article, titled ‘China flexes its muscles over Hinkley Point’ published on the following day, the Financial Times argued that while China’s disappointment over the UK’s delay of the deal “may be understandable” as it “has invested a great deal of political capital” in this project, “it should not overreact.”

In its opinion, which is more constructive and face-saving, the Hinkley Point “is both a complex commercial project and a delicate political issue for several reasons that have little to do with China”.

The newspaper advised that “China should be understanding even if the UK decides after its review to scrap the Hinkley project entirely.”

Moreover, it added that “Beijing need only look at the swaths of its own domestic economy that remain resolutely closed to foreign investors to remind itself that Britain maintains one of the most open investment environments in the world.”

China’s muscle-reflecting and its rather arrogant attitudes, e.g. “you’re wrong and we’re right” or “you’re a small country and we’re a big country” views, have stirred uneasiness and resentment in some countries.

Though it is unsure whether they have actually transformed into “China-phobia”, concerns or even fears over China’s intentions, behaviors and investments exist in Great Britain, Australia and perhaps in other countries.

Those apprehensions also play a key role in defining their relations with China. As shown in the editorial of the Independent mentioned above, China’s behaviors in the international sphere, e.g. its assertive and coercive behaviors in the South China Sea, affect perceptions and apprehensions of the UK’s government and public.

This demonstrates that like material powers, e.g. economic and military capabilities, non-material factors, e.g. perceptions and reputations, are also influential in international politics.

Xuan Loc Doan is a research fellow at the Global Policy Institute. He completed a PhD in International Relations at Aston University, UK, in 2013. His areas of interest and research include Vietnam’s domestic and foreign policy, ASEAN’s relations with major powers and international politics in the Asia-Pacific region.

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