China’s Achilles’ Heel

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China’s Achilles’ Heel

With little in the way of force projection, China’s dependence on natural resources in unstable parts of the world could undercut its economic ambitions. There are limits to freeriding.

The seizure of 29 Chinese workers by Sudanese rebels in the southern part of Sudan last week exposed one of the most vulnerable links in China’s ambitious plan for extending its economic influence abroad. To be sure, this isn’t the first time workers sent by China to dangerous regions were kidnapped or harmed. Five years ago, three Chinese engineers were murdered by a militant group in Pakistan. When civil war broke out in Libya nearly a year ago, Beijing had to dispatch a fleet of ships and airplanes to evacuate more than 30,000 Chinese workers from the country.

Despite the release of the workers this week, such incidents – and there will be many similar ones in the future – raise several important questions about China’s strategy of “going out” in general, and its quest for natural resources in particular.

The motivations for Beijing to expand its economic reach across the globe are easy to understand. The Chinese economy is resource-intensive and depends on secure access to energy, minerals, and other commodities to sustain its growth.  Unfortunately, the geopolitics and economics of natural resources are tricky. Most of them are located in unstable or war-torn countries, with poor infrastructure, corrupt governments, and intractable ethnic conflict. The global markets for natural resources are notoriously volatile and frequently go through boom-bust cycles. Worse still, as a late-comer to the scene, the low-hanging fruits have already been picked by entrenched and powerful Western multinationals, such as Exxon, Shell, BP, Rio Tinto, BHP, and the likes, which have established seemingly unchallengeable advantages in technology, capital, and risk management.

Faced with such a strategic landscape in the competition for natural resources, China has long concluded that it will risk letting its economic security held hostage by the vagaries of the market and the entrenched Western giants if it doesn’t make a concerted all-out effort to gain direct access to strategic natural resources. The policy and actions flowing from this strategic assessment in the past decade are easy to see: China has become the world’s most aggressive player in competing for access to natural resources. It has tied its foreign aid program to gaining concessions on exploiting natural resources. Its state-owned companies, supported by access to cheap (if not free) credit from Chinese banks, often outbid foreign competitors in securing contracts and exploration rights. It is willing to take excessive financial and security risks and encourages its companies to venture into areas, such as Sudan, Zimbabwe, and Congo, where their Western rivals don’t dare to tread.

But in executing this strategy, the Chinese have found themselves facing a fundamental dilemma: it’s a rising power with global economic interests, but no global power projection capabilities to protect these interests.

On most occasions, to be sure, China can free-ride on the security provided by the West, especially the United States. For example, with the U.S. Navy patrolling the sea lanes and keeping a close watch on conflict-prone areas, China gains free protection. One of the most illustrative cases is China’s $3 billion investment in an Afghan copper mine, which is protected by the U.S. Army.

Yet, free-riding has its limits. There are areas where conditions are so unstable that even Uncle Sam doesn’t want to risk the lives of its soldiers. Sudan is one such country.

If China insists on going it alone in its quest for resource security, its only option for protecting its sprawling interests is to develop commensurate power projection capabilities. This will be both costly and, more worryingly, cause anxieties among its neighbors and Western countries since it will entail sustained and massive increases in China’s military spending. This option, which will take years, if not decades, to implement, won’t meet the more immediate needs of providing security for Chinese economic interests in dangerous places anyway.

Without its own power projection capabilities, China will have to do one of two things.

First, it can simply do nothing and let itself be literally held hostage by the geopolitical and security risks prevalent in the regions where it has made valuable investments. This is hardly an attractive option because China risks losing its investments and its government, which has been subject to fierce criticisms in the Chinese cyberspace after the kidnapping of Chinese workers in Sudan, will appear weak, incompetent, and helpless.

Second, China can alter its existing go-alone strategy and join the West in ensuring collective resource security. This requires a fundamental change in Beijing’s mindset. (And obviously, similar adjustments are needed in the West as well.) Instead of viewing the quest for resources as a zero-sum game, China will see that its interests are closely linked with those of the West, and that it can make its investments and operations in far-flung regions more secure by pooling its efforts with those of the West. 

Such a cooperative strategy will likely yield more benefits than China’s cut-throat competitive strategy. On the financial front, China won’t be wasting money trying to outbid its Western rivals (who will be partners). Its development aid will be more aligned with the goals of seeking conflict resolution and improving governance, rather than with obtaining competitive advantages in securing contracts. By partnering with the West in making resource-rich developing countries more stable, China will in fact reduce the risks of its investments and economic interests there. Even in crises such as the ongoing hostage drama in Sudan, a China in close cooperation with the West may seek direct assistance from its partners that have the requisite military capabilities in these areas. So for China, shifting its current strategy will be truly win-win.

To a Chinese leadership steeped in realpolitik and paranoia about the West, this proposal may sound naïve. But the alternatives are far worse. If Beijing stays on its present course of seeking resource security at any cost, it will run into crises far worse than the one they have just encountered in southern Sudan.